Which of the Following Journal Entries Is Required to Close

question 22

Multiple Choice

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

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

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Definitions:

Journal Entries

The foundational records in accounting that detail all financial transactions, using debits and credits to maintain balance.

Cash Flow Hedge

A type of hedge that is used to manage exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a forecasted transaction.

Forward Contract

A tailor-made deal between two participants to transfer an asset at a fixed price on a specified future date.

Net Method

An accounting method that records the net of discounts or expenses directly on invoices at the time of purchase or sale.