How to close revenue accounts journal entry?
Understand the Problem
The question is asking for guidance on how to properly make journal entries to close revenue accounts in accounting. This involves transferring the balances of revenue accounts to retained earnings to reflect the closing process at the end of an accounting period.
Answer
Close revenue accounts by debiting them and crediting Income Summary.
Close revenue accounts by debiting them and crediting Income Summary.
Answer for screen readers
Close revenue accounts by debiting them and crediting Income Summary.
More Information
Closing revenue accounts at the end of an accounting period ensures that revenue is not carried into the next period, allowing for an accurate representation of revenue for each period.
Tips
A common mistake is to incorrectly credit the revenue accounts instead of debiting them, which would increase the balances instead of reducing them to zero.
Sources
- Recording a Closing Entry - Investopedia - investopedia.com
- Closing Entry - Definition, Explanation, and Examples - Corporate Finance Institute - corporatefinanceinstitute.com
- Closing Entries | Financial Accounting - Courses.lumenlearning.com - courses.lumenlearning.com
