A profitable corporation would close out Income Summary by:

Question

Quizplus · Accepted Answer

A profitable corporation would close out Income Summary by debiting Income Summary and crediting Retained Earnings. This is because Retained Earnings account represents the cumulative earnings that the company has not paid out as dividends to its shareholders. By transferring the balance of Income Summary to Retained Earnings, the company recognizes and preserves profits that can be used for future business operations, investments, or distributions to shareholders. Choice A, C, and D are incorrect because they involve crediting Share Capital or debiting Share Capital, which does not reflect the allocation of profits earned by the corporation.

A Profitable Corporation Would Close Out Income Summary By