The income statement for the month of June, 2010 of Ramirez Enterprises contains
ID: 2434216 • Letter: T
Question
The income statement for the month of June, 2010 of Ramirez Enterprises contains the following information:
Revenues
$7,000
Expenses:
Wages Expense
$2,000
Rent Expense
1,000
Supplies Expense
300
Advertising Expense
200
Insurance Expense
100
Total expenses
3,600
Net income
$3,400
The entry to close the revenue account includes a
debit to Income Summary for $7,000.
credit to Income Summary for $7,000.
debit to Income Summary for $3,400.
credit to Income Summary for $3,400.
Revenues
$7,000
Expenses:
Wages Expense
$2,000
Rent Expense
1,000
Supplies Expense
300
Advertising Expense
200
Insurance Expense
100
Total expenses
3,600
Net income
$3,400
Explanation / Answer
1. We Close the income statement accounts with credit balances (normally revenue accounts) to a special temporary account named income summary. 2. Then we close income summary to the owner's capital account or, in corporations, to the retained earnings account. The purpose of the income summary account is simply to keep the permanent owner's capital or retained earnings account uncluttered. So in given case, correct option is debit to Income Summary for $7,000
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