Closing entries can be prepared by referring solely to the Income Statement columns of the work sheet.

Question

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Closing entries require information from both the Income Statement and Balance Sheet columns of the work sheet. Specifically, the Income Summary account in the Balance Sheet column is used to transfer net income or loss to the Retained Earnings account. The Retained Earnings account is then closed to the owner's equity account. Therefore, both columns are needed to prepare closing entries.

Closing Entries Can Be Prepared by Referring Solely to the Income