In the closing process, the amounts reported on the income statement (revenues and expenses) are transferred to which account?

• A. Common Stock
• B. Cash
• C. Income Summary
• D. Retained Earnings

Answer: (C)

Verified step by step guidance

1. Understand that the closing process in accounting is used to transfer temporary account balances (revenues and expenses) to a permanent account to prepare the accounts for the next period.
2. Identify that revenues and expenses are temporary accounts reported on the income statement, and they need to be closed out at the end of the accounting period.
3. Recognize that the temporary accounts are first closed to an intermediate account called the Income Summary account, which summarizes the net income or loss for the period.
4. Know that after closing revenues and expenses to the Income Summary account, the balance in Income Summary (which represents net income or loss) is then transferred to Retained Earnings, a permanent equity account.
5. Therefore, the amounts reported on the income statement (revenues and expenses) are initially transferred to the Income Summary account during the closing process.