If Income Summary Has a Credit Balance After Revenues and Expenses

question 88

Multiple Choice

If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a

• A) debit to Retained Earnings.
• B) debit to Dividends.
• C) credit to Retained Earnings.
• D) credit to Dividends.

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Definitions:

Bad Debt Expense

The cost associated with accounts receivable that a company is not able to collect from its debtors, recognized as an expense on the income statement.

Net Realizable Value

The estimated selling price of goods, minus the estimated costs of completion and the costs necessary to make the sale, often used in inventory valuation and accounts receivable.

Notes Receivable

Financial claims against debtors documented through promissory notes that promise to pay the amount due with interest.

Bad Debt Expense

An expense account reflecting the cost of accounts receivable that a company does not expect to collect.