A company had revenues of $54,000 and expenses of $43,250 for the accounting period. The company paid $5,950 cash in dividends to the owner (sole shareholder). Which of the following entries could not be a closing entry? A. Debit Income Summary $10,750; credit Retained Earnings $10,750.
B. Debit Income Summary $54,000; credit Revenues $54,000.
C. Debit Revenues $54,000; credit Income Summary $54,000.
D. Debit Income Summary $43,250, credit Expenses $43,250.
E. Debit Retained Earnings $5,950, credit Dividends $5,950.

B. Debit Income Summary $54,000; credit Revenues $54,000.

Explanation:

The following entries can be a closing entry

a)To record closing entry of revenue account

Account                                                    Debit                          Credit

Revenues                                              $54,000

Income summary                                                                      $54,000

b)To record closing entry of expense account

Income summary                                  $43,250

Expenses                                                                                       $43,250

c)To record closing entry of income summary account

Income summary ( $54,000- $43,250)   $10,750

Retained earnings                                                                           $10,750

d) to record the closing entry of dividends account

Retained Earnings                                        $5,950

Dividend                                                                                               $5,950

The entry that  could not be a closing entry is B. Debit Income Summary $54,000; credit Revenues $54,000 because income summary account should be credited with the revenue amount of $54,000 as Revenue increases the  income of every business.

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