Post Closing Entries Income Summary

You take your net income from various sources and transfer them to the income summary account.

Post closing entries income summary. The net balance of the income summary account is closed to the retained earnings account. Income summary account is a temporary account used in the closing stage of the accounting cycle to compile all income and expense balances and determine net income or net loss for the period. Close income summary account. Income summary allows us to ensure that all revenue and expense accounts have been closed.

At this point you have closed the revenue and expense accounts into income summary. The transfer of these balances is shown in figure 3 7. Using income summary in closing entries. The net result of income less expenses becomes retained earnings.

The balance in income summary now represents 37 100 credit 28 010 debit or 9 090 credit balance does that number seem familiar. Summary of the closing entries. The income summary account would have a credit balance of 1 060 9 850 credit in the first entry and 8 790 debit in the second. Then you throw in expenses.

After the revenue and expense accounts have been closed it is desirable to prepare post closing trial balance. The income summary account is simply a placeholder for account balances at the end of the accounting period while closing entries are being made. This trial balance has same total as appears in balance sheet. 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.

Closing income summary account. In the closing stage balances in all income accounts are transferred to the income summary account by debiting. Income summary entries are a tool for closing out accounts at the end of a month quarter or year. The income summary account is a temporary account used to store income statement account balances during the closing entry step of the accounting cycle.

When entries 1 and 2 are posted to the general ledger the balances in all revenue and expense accounts are transferred to the income summary account. Notice that a zero balance results for each revenue and expense account after the closing entries are posted and there is a 1 932 credit. After the expense and revenue accounts are. It should income summary should match net income from the income statement.