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    jahubb's Avatar
    jahubb Posts: 27, Reputation: 1
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    #1

    Jan 15, 2008, 09:52 PM
    Closing a temporary account
    Which of the following entries properly closes a temporary account?
    A. $200 debit, Dividends: $200 credit, Retained Earnings
    B. $400 debit, Income Summary; $400 credit, Rent Expense
    C. $1600 debit, Accumulated Depreciation; $1600 debit, Income Summary
    D. $20,000 debit, Income Summary; $20,000 credit, Service Revenue
    Which is correct and why?
    crash08's Avatar
    crash08 Posts: 5, Reputation: 1
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    #2

    Jan 15, 2008, 10:02 PM
    Answer is B

    Few rules for when you close temp accounts:

    Always close accounts with "income summary" account.

    If you have Revenue accounts such as sales, interest, or rent revenue, then it's like this
    Debt Rev account
    Credit Income summary

    For Expenses
    Debt Income summary
    Credit expense account

    Debt Income summary
    Credit Retained Earning


    Make sense?

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