Which of the Following Journal Entries Is Required to Close

question 21

Multiple Choice

Which of the following journal entries is required to close the Income Summary account of a company with a net loss?

• A) Debit Income Summary, credit Capital Stock.
• B) Debit Income Summary, credit Retained earnings.
• C) Credit Income Summary, debit Retained earnings.
• D) Credit Income Summary, debit Dividends.

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Definitions:

Net Income

A company's revenue minus all its expenses and taxes equals its total income.

Fixed Assets

Long-term tangible assets used in the operation of a business and not expected to be converted to cash in the near term.

Additional Funds Needed

The extra amount of financing a company requires to fund its operations and growth beyond its current financial resources.

AFN Equation

Stands for Additional Funds Needed, a financial formula used to determine the additional financing a company will require in the future, based on its growth plans and financial policies.