A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The company paid $8,000 cash in dividends to the owner (sole shareholder). Which of the following entries could not be a closing entry?
A)Debit Income Summary $13,000; credit Retained Earnings $13,000.
B)Debit Income Summary $75,000; credit Revenues $75,000.
C)Debit Revenues $75,000; credit Income Summary $75,000.
D)Debit Income Summary $62,000; credit Expenses $62,000.
E)Debit Retained Earnings $8,000; credit Dividends $8,000.

Question

Quizplus · Accepted Answer

This entry would not be a closing entry because it is simply a reversal of the initial entry to record revenues. Closing entries are used to transfer the balances of temporary accounts (such as revenues and expenses) to the permanent retained earnings account, and this entry does not do that. The correct closing entry for revenues would be to debit Income Summary $75,000 and credit Retained Earnings $75,000.

A Company Had Revenues of $75,000 and Expenses of $62,000