Income Summary Meaning In Accounting

At the end of each accounting period all of the temporary accounts are closed.

Income summary meaning in accounting. Temporary account used only in the closing process to which the balances of revenue and expense accounts including any gains or losses are transferred. Thus shifting revenue out of the income statement means debiting the revenue account for the total amount of revenue recorded in the period and crediting. The income summary account is a temporary account into which all income statement revenue and expense accounts are transferred at the end of an accounting period. What is the income summary account.

The income summary account is a temporary account used with closing entries in a manual accounting system. The net amount transferred into the income summary account equals the net profit or net loss that the business incurred during the period. A fiscal year fy does not necessarily follow the calendar year. One meaning of income refers to revenue or sales.

You might have heard people call this closing the books temporary accounts like income and expenses. Basically the income summary account is nothing more than a placeholder for the income and expense accounts at the end of the period. Income summary can be called a clearing account because the income summary account is only used for one process there will or should be a zero balance in the income summary account before the process and a zero. What does income summary mean.

This account is then closed to the owner s capital account or a corporation s retained earnings account. Revenue is an equity account that has a credit balance. Income is used in the accounting profession to mean several different things. Revenue is the money that a company receives from selling goods or services throughout the course of business.

The income summary account is an account that receives all the temporary accounts of a business upon closing them at the end of every accounting period fiscal year fy a fiscal year fy is a 12 month or 52 week period of time used by governments and businesses for accounting purposes to formulate annual financial reports. The income summary account is a temporary account used to close all income and expense accounts at the end of an accounting period. A temporary account to which the income statement accounts are closed. If the net balance of income summary is a credit balance it means the company has made a profit for that year or if the net balance is a debit balance it means the company has made a loss for that year.

Its balance is transferred to the capital account or retained earnings for a corporation. Income summary account definition. It may be a period such as october 1 2009 september 30 2010. Computerized accounting systems may close the temporary accounts without recording the amounts in an income summary account the income summary is very temporary since it has a zero balance throughout.

This and other summary accounts can be thought of as a clearing account.