In preparing closing entries at the end of an accounting period, which of the following accounts is NOT closed to the Income Summary account?

• A. Rent Expense
• B. Salaries Expense
• C. Service Revenue
• D. Retained Earnings

Answer: (D)

Verified step by step guidance

1. Understand the purpose of closing entries: Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts (revenues, expenses, and dividends) to permanent accounts (Retained Earnings). This process resets the temporary accounts to zero for the next accounting period.
2. Identify the temporary accounts: Temporary accounts include revenue accounts (e.g., Service Revenue), expense accounts (e.g., Rent Expense, Salaries Expense), and dividend accounts. These accounts are closed to the Income Summary account during the closing process.
3. Recognize the permanent accounts: Permanent accounts, such as Retained Earnings, are not closed to the Income Summary account. Instead, the balance of the Income Summary account is transferred to Retained Earnings after all temporary accounts are closed.
4. Analyze the given options: Rent Expense, Salaries Expense, and Service Revenue are temporary accounts that are closed to the Income Summary account. Retained Earnings is a permanent account and is not closed to the Income Summary account.
5. Conclude the process: After closing all temporary accounts to the Income Summary account, the final step is to transfer the balance of the Income Summary account to Retained Earnings, ensuring the accounting cycle is complete.