The First Two Closing Entries to the Income Summary Account

question 44

Multiple Choice

The first two closing entries to the Income Summary account indicate a debit of $53,000 and a credit of $64,000. The third closing entry would be:

• A)debit Capital $11,000; credit Income Summary $11,000.
• B)debit Revenue $64,000; credit Expenses $53,000.
• C)debit Income Summary $11,000; credit Drawing $11,000.
• D)debit Income Summary $11,000; credit Capital $11,000.

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Definitions:

Functional Currency

The form of money used in the main economic region where a business is active and conducts its dealings.

Net Exchange Differences

The net result of gains or losses on foreign currency transactions and translation of foreign operations, reflecting the impact of exchange rates fluctuations on financial statements.

Financial Instruments

Contracts that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Revaluation Gain

An increase in the value of an asset over its previously recorded book value, recognized after a revaluation process.