To close net income to retained earnings, Income Summary is debited and Retained Earnings is credited.

Question

Quizplus · Accepted Answer

This is a correct statement. At the end of an accounting period, the balance in the Income Summary account represents the net income earned during that period. To transfer this balance to the Retained Earnings account, Income Summary is debited (to reduce its balance to zero) and Retained Earnings is credited (with the same amount as the net income). This closes the temporary accounts (revenue, expense, and dividend accounts) and updates the permanent Retained Earnings account with the current year's earnings.

To Close Net Income to Retained Earnings, Income Summary Is