Which of the following is NOT a closing entry?

• A. Debiting Service Revenue and crediting Income Summary
• B. Debiting Dividends and crediting Retained Earnings
• C. Debiting Income Summary and crediting Retained Earnings
• D. Debiting Cash and crediting Service Revenue

Answer: (D)

Verified step by step guidance

1. Understand the concept of closing entries: Closing entries are journal entries made at the end of an accounting period to transfer balances from temporary accounts (like revenues, expenses, and dividends) to permanent accounts (like Retained Earnings). This process resets the temporary accounts to zero for the next accounting period.
2. Analyze the provided options: Review each entry to determine whether it is a closing entry. Closing entries typically involve temporary accounts such as Service Revenue, Expenses, Dividends, and Income Summary, and they aim to transfer balances to Retained Earnings.
3. Evaluate the first option: Debiting Service Revenue and crediting Income Summary is a closing entry because it transfers the revenue balance to the Income Summary account, which is part of the closing process.
4. Evaluate the second option: Debiting Dividends and crediting Retained Earnings is a closing entry because it transfers the dividends balance to Retained Earnings, which is part of the closing process.
5. Evaluate the fourth option: Debiting Cash and crediting Service Revenue is NOT a closing entry because it involves a permanent account (Cash) and does not reset a temporary account. This type of entry is a regular transaction, not part of the closing process.