Given the following end-of-period figures: Service Revenue of \$8,000, Salaries Expense of \$3,000, and Rent Expense of \$1,000, which of the following is the correct journal entry to close the revenue and expense accounts at the end of the period?

• A. Debit Service Revenue \$8,000; Credit Salaries Expense \$3,000; Credit Rent Expense \$1,000; Credit Retained Earnings \$4,000
• B. Debit Service Revenue \$8,000; Credit Income Summary \$8,000; Debit Income Summary \$4,000; Credit Salaries Expense \$3,000; Credit Rent Expense \$1,000; Credit Retained Earnings \$4,000
• C. Debit Service Revenue \$8,000; Credit Income Summary \$8,000; Debit Income Summary \$4,000; Credit Salaries Expense \$3,000; Credit Rent Expense \$1,000
• D. Debit Service Revenue \$8,000; Credit Income Summary \$8,000; Debit Income Summary \$4,000; Credit Salaries Expense \$3,000; Credit Rent Expense \$1,000; Credit Retained Earnings \$4,000

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the purpose of closing entries. Closing entries are made at the end of an accounting period to transfer balances from temporary accounts (like revenues and expenses) to permanent accounts (like Retained Earnings). This resets the temporary accounts to zero for the next period.
2. Step 2: Begin by closing the revenue account. To close Service Revenue, debit the Service Revenue account for its balance ( $\mathrm{8,000}$ ), and credit the Income Summary account for the same amount. This transfers the revenue balance to the Income Summary account.
3. Step 3: Close the expense accounts. For Salaries Expense ( $\mathrm{3,000}$ ) and Rent Expense ( $\mathrm{1,000}$ ), debit the Income Summary account for the total of these expenses ( $\mathrm{4,000}$ ), and credit each expense account for their respective balances. This transfers the expense balances to the Income Summary account.
4. Step 4: Close the Income Summary account to Retained Earnings. After transferring revenues and expenses to the Income Summary account, the balance in Income Summary represents the net income ( $\mathrm{4,000}$ ). Debit the Income Summary account for this amount and credit Retained Earnings to transfer the net income to the equity section of the balance sheet.
5. Step 5: Verify that all temporary accounts (Service Revenue, Salaries Expense, Rent Expense, and Income Summary) have been closed and their balances are zero. This ensures the accounts are ready for the next accounting period.