Which of the following is the correct closing entry to close revenue accounts at the end of the accounting period?

• A. Debit Revenue; Credit Retained Earnings
• B. Debit Income Summary; Credit Revenue
• C. Debit Retained Earnings; Credit Revenue
• D. Debit Revenue; Credit Income Summary

Answer: (D)

Verified step by step guidance

1. Understand the purpose of closing entries: Closing entries are used to transfer the balances of temporary accounts (like revenue, expenses, and dividends) to permanent accounts (like retained earnings) at the end of the accounting period.
2. Identify the accounts involved: Revenue accounts need to be closed, and their balances are transferred to the Income Summary account. This is a temporary account used to summarize revenues and expenses before transferring the net income or loss to Retained Earnings.
3. Determine the correct entry: To close revenue accounts, you need to debit the Revenue account (to reduce its balance to zero) and credit the Income Summary account (to transfer the revenue balance).
4. Write the journal entry: The closing entry for revenue accounts is: Debit Revenue; Credit Income Summary. This ensures that the revenue account is cleared and its balance is moved to the Income Summary account.
5. Verify the process: After closing the revenue accounts, the Income Summary account will hold the net income or loss, which will later be closed to Retained Earnings in subsequent closing entries.