Chapter 5, Problem 5.6E

To determine

Income statement:

This is a financial statement that shows the net income earned, or net loss suffered by a company, through reporting all the revenues earned, and expenses incurred, by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

Sales section:

Sales section of the income statement computes the net sales of the Company during the accounting period.

Closing entries:

Closing entries are those journal entries which are passed to transfer the balances of temporary accounts to the permanent accounts. These are passed at the end of the accounting period, to transfer the final balance.

Rules for closing entries:

1. a) Debit the account: All temporary accounts with credit balances.
2. b) Credit the account: All temporary accounts with debit balances

To Prepare: (a) Sales section of the income Statement of T Company and (b) Closing entries for (1) sale revenue, and (2) the contra accounts to sales revenue.