Closing Entries Income Summary Example

Examples of closing entries.

Closing entries income summary example. Closing income summary account. The income summary account is a temporary account used to store income statement account balances during the closing entry step of the accounting cycle. Income summary is a temporary account in which all the closing entries of revenue and expenses accounts are netted at the end of the accounting period and the resulting balance is considered as profit or loss. In this example we will close paul s guitar shop inc s temporary accounts using the income summary account method from his financial statements in the previous example.

Income summary allows us to ensure that all revenue and expense accounts have been closed. Using income summary in closing entries. Below are some of the examples of closing entries that can be used to transfer revenue and expense account balances into income summary and from there to the retained earnings. There are three general closing entries that must be made.

Rather than closing the revenue and expense accounts directly to retained earnings and possibly missing something by accident we use an account called income summary to close these accounts. Summary of the closing entries.