When Income Summary has a credit balance and the account is closed,
A) Capital is decreased.
B) Capital is increased.
C) Withdrawals is increased.
D) None of these are correct.

Question

Quizplus · Accepted Answer

If Income Summary has a credit balance, it means that revenues for the period exceed expenses. Closing the Income Summary account means transferring the balance to the owner's capital account. Since the balance is a credit (revenue exceeds expenses), this transfer will increase the capital account. Therefore, the correct answer is B, "Capital is increased."

When Income Summary Has a Credit Balance and the Account