Practice prompt · Q:transactions-to-statements/closing-through-income-summary-001

Read the income summary balance before it is closed

Tests whether the learner knows what income summary holds after revenues and expenses are closed and where that balance goes next.

Updated Aug 18, 2026 Review due Nov 18, 2026

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An adjusted trial balance shows total revenues of 612,000, total expenses of 548,000, and dividends of 30,000. The first two closing entries have been posted.

Income summary exists as a checkpoint. Its balance at that moment should equal the net income the income statement reports. A difference means the closing entries and the statement were not built from the same adjusted balances.

Choose the best answer. a Income Summary has a credit balance of 64,000, which is closed to Retained Earnings. b Income Summary has a credit balance of 34,000, which is closed to Retained Earnings. c Income Summary has a debit balance of 64,000, which is closed to Dividends. d Income Summary is already zero, because closing revenues and expenses offsets it.

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Answer: a

Choice a. After the first two closing entries, Income Summary holds net income of 64,000 as a credit, and the third entry closes it to Retained Earnings.