{"id":199765,"date":"2025-03-12T15:24:43","date_gmt":"2025-03-12T15:24:43","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=199765"},"modified":"2025-03-12T15:24:45","modified_gmt":"2025-03-12T15:24:45","slug":"which-of-the-following-could-not-possibly-be-a-closing-entry","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/12\/which-of-the-following-could-not-possibly-be-a-closing-entry\/","title":{"rendered":"Which of the following could not possibly be a closing entry"},"content":{"rendered":"\n

Which of the following could not possibly be a closing entry?<\/p>\n\n\n\n

a. Debit Income Summary and credit Owner’s Capital
b. Debit Owner’s Capital and credit Owner’s Withdrawals
c. Debit Income Summary and credit Owner’s Withdrawals
d. Debit Owner’s Capital and credit Income Summary<\/p>\n\n\n\n

The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n

Correct Answer: C. Debit Income Summary and Credit Owner’s Withdrawals<\/strong><\/h3>\n\n\n\n

Explanation:<\/h3>\n\n\n\n

In accounting, closing entries are made at the end of an accounting period to reset revenue, expense, and withdrawal accounts to zero and transfer their balances to the owner\u2019s capital account. The four typical closing entries are:<\/p>\n\n\n\n

    \n
  1. Closing Revenues to Income Summary:<\/strong><\/li>\n<\/ol>\n\n\n\n
      \n
    • Debit Revenue Accounts<\/strong><\/li>\n\n\n\n
    • Credit Income Summary<\/strong><\/li>\n<\/ul>\n\n\n\n
        \n
      1. Closing Expenses to Income Summary:<\/strong><\/li>\n<\/ol>\n\n\n\n
          \n
        • Debit Income Summary<\/strong><\/li>\n\n\n\n
        • Credit Expense Accounts<\/strong><\/li>\n<\/ul>\n\n\n\n
            \n
          1. Closing Income Summary to Owner’s Capital (for sole proprietorships) or Retained Earnings (for corporations):<\/strong><\/li>\n<\/ol>\n\n\n\n
              \n
            • If the business had a net profit<\/strong>, the entry is:\n
                \n
              • Debit Income Summary<\/strong><\/li>\n\n\n\n
              • Credit Owner’s Capital<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n
              • If the business had a net loss<\/strong>, the entry would be the opposite:\n
                  \n
                • Debit Owner’s Capital<\/strong><\/li>\n\n\n\n
                • Credit Income Summary<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n
                    \n
                  1. Closing Withdrawals (or Dividends) to Owner’s Capital:<\/strong><\/li>\n<\/ol>\n\n\n\n
                      \n
                    • Debit Owner’s Capital<\/strong><\/li>\n\n\n\n
                    • Credit Owner’s Withdrawals<\/strong><\/li>\n<\/ul>\n\n\n\n

                      Why Option C<\/strong> is Incorrect:<\/h4>\n\n\n\n

                      The incorrect option, “Debit Income Summary and Credit Owner’s Withdrawals,”<\/strong> does not follow proper closing entry logic. Withdrawals (or drawings) are not closed through Income Summary but directly to the Owner\u2019s Capital<\/strong> account. Income Summary is only used to close revenues and expenses, summarizing the net income or loss before transferring it to the owner’s capital.<\/p>\n\n\n\n

                      Thus, an entry attempting to close withdrawals through Income Summary is incorrect, as withdrawals do not affect net income. Instead, withdrawals reduce Owner\u2019s Capital<\/strong>, not Income Summary<\/strong>.<\/p>\n\n\n\n

                      Therefore, the answer is C<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

                      Which of the following could not possibly be a closing entry? a. Debit Income Summary and credit Owner’s Capitalb. Debit Owner’s Capital and credit Owner’s Withdrawalsc. Debit Income Summary and credit Owner’s Withdrawalsd. Debit Owner’s Capital and credit Income Summary The correct answer and explanation is : Correct Answer: C. Debit Income Summary and Credit […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-199765","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/199765","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=199765"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/199765\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=199765"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=199765"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=199765"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}