If a company reports a loss for the year, the closing entry will result in which of the following?
A)A debit to retained earnings
B)A debit to miscellaneous expense
C)A credit to unearned revenue
D)A debit to capital stock

Question

Quizplus · Accepted Answer

When a company reports a loss for the year, it means that expenses have exceeded revenues, which reduces the net income of the company. To reflect this in the accounting records, the closing entry would involve debiting the Retained Earnings account, which is a component of shareholders' equity, for the amount of the loss. This reduces the balance in the Retained Earnings account, which is reported on the balance sheet, and indicates that the company has less equity as a result of the loss.

If a Company Reports a Loss for the Year, the Closing