Income Summary, before closing to Capital, contains a debit balance of $86 and a credit balance of $100. What is the entry to close Income Summary to Capital?
A) Debit Income Summary $100; credit Capital $100
B) Debit Income Summary $86; credit Capital $86
C) Debit Capital $14; credit Income Summary $14
D) Debit Income Summary $14; credit Capital $14

Question

Quizplus · Accepted Answer

The purpose of closing the Income Summary account is to transfer its balances to the Capital account. Since the Income Summary has a credit balance of $100 and a debit balance of $86, we need to find the difference between the two, which is $14. Therefore, we need to debit the Income Summary for $14 (to reduce its credit balance) and credit the Capital account for $14 (to increase its balance). This can be accomplished with the entry: Debit Income Summary $14; credit Capital $14.

Income Summary, Before Closing to Capital, Contains a Debit Balance