If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a
A) debit to the retained earnings account.
B) debit to the dividends account.
C) credit to the retained earnings account.
D) credit to the dividends account.

Question

Quizplus · Accepted Answer

A credit balance in Income Summary indicates that the company has earned a net income for the period. Therefore, the closing entry for Income Summary should transfer this balance to the Retained Earnings account with a credit entry. Option A and B are not correct as they would reduce the Retained Earnings balance. Option D is also not correct as dividends are paid out of Retained Earnings, not Income Summary.

If Income Summary Has a Credit Balance After Revenues and Expenses