Closing Entries in Accounting

Imagine you're at a party hosted by Sophia, and she's closing out the night. In the closing process, what does she transfer to the Income Summary account to wrap up the event?

• The revenues and expenses are transferred to the Income Summary account.

• Only revenues are transferred to the Income Summary account.

• Only expenses are transferred to the Income Summary account.

• Assets and liabilities are transferred to the Income Summary account.

Imagine you're the accountant for a magical kingdom! In the closing entries, what is the credit amount for the Income Summary in Step 1?

• The credit amount for Income Summary in Step 1 is typically the total revenues for the period.

• The credit amount for Income Summary in Step 1 is typically the total expenses for the period.

• The credit amount for Income Summary in Step 1 is typically the net income for the period.

• The credit amount for Income Summary in Step 1 is typically the total assets for the period.

Imagine you're helping Isla with her accounting homework. She wants to know: How do we increase an equity account in a journal entry?

• By debiting the equity account

• By crediting the equity account

• By both debiting and crediting the equity account

• By neither debiting nor crediting the equity account

Imagine Rohan's lemonade stand had a tough month, and expenses were greater than revenue, leading to a net loss. A net loss would decrease retained earnings, so Rohan needs to do the opposite in his journal entry by debiting _______ and crediting Income Summary. Can you help Rohan figure it out?

• Retained Earnings

• Cash

• Accounts Receivable

• Inventory

Avery and William are discussing their business finances. Avery asks, "What happens to our retained earnings if we have a net loss this year?" How should William respond?

• It has no effect on retained earnings.

• It decreases retained earnings.

• It doubles retained earnings.

• It increases retained earnings.

Imagine you're helping Sophia with her accounting homework. She needs to know: Which account gets a debit when it's time to close those revenue accounts at the end of the period?

• Retained Earnings account

• Expense account

• Income Summary account

• Revenue account

Imagine you're the accountant for a magical kingdom! What role does the mystical Income Summary account play in your financial wizardry?

• To record daily transactions

• To manage inventory levels

• To summarize revenues and expenses for the period

• To track cash flow

Avery and Liam are running a lemonade stand. At the end of the day, they count their earnings. What happens to their retained earnings when they report a net income?

• Retained earnings increase.

• Retained earnings are eliminated.

• Retained earnings decrease.

• Retained earnings remain unchanged.

Imagine you're in a magical accounting world, and Ethan is on a quest to close the expense accounts. Which mystical account does he credit to complete his mission?

• Retained Earnings account

• Expense account

• Revenue account

• Income Summary account

Imagine you're an accounting wizard like Aria, Isla, or Zoe, and you're tasked with a magical accounting ritual. What is the primary purpose of performing the closing entries spell?

• To adjust asset values

• To reset temporary accounts for the next period

• To prepare financial statements

• To calculate net income