2006-06-14 02:30:23 · 3 answers · asked by Anonymous in Business & Finance ➔ Other - Business & Finance
I am fully agreed with the answer no. 1 of CSUCDARTGIRL
2006-06-16 02:42:17 · answer #1 · answered by faisal: cma,apa 3 · 0⤊ 1⤋
This is used to close out accounts at the end of the period.
All revenues accounts are debited, and the Income Summary account is credited for the total of the debits. Then all expense accounts are credited, and the Income Summary account is debited for the total of all credits. At this point all revenue and expense accounts have a zero balance. The balance in Income Summary is equal to the Net Income or Net Loss for the year.
Finally the Income Summary account has to be closed. We make the entry necessary to bring that account to zero, and post the opposite side of the entry to the Retained Earnings account. The last entry is to close all dividend accounts to Retained Earnings. And we are done for the year.
2006-06-14 03:10:06 · answer #2 · answered by csucdartgirl 7 · 1⤊ 0⤋
It is most commonly used in closing out the temporary accounts at the end of the reporting period. It is used to counterbalance them in the journal entry and at the end the total balance in that account, Income Summary, gets closed in R/E.
2006-06-14 03:14:05 · answer #3 · answered by fasb123r 4 · 0⤊ 0⤋