The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information: After the revenue and expense accounts have been closed, the balance in Income Summary will be

Question

The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information:  After the revenue and expense accounts have been closed, the balance in Income Summary will be

Quizplus · Accepted Answer

Since the company had revenues of $11,000 and expenses of $8,700, the net income for the month is $2,300 ($11,000 - $8,700 = $2,300). This net income is transferred to the Income Summary account. Since the net income is a credit balance, the Income Summary account will have a credit balance of $2,300. After closing the revenue and expense accounts, the balance in the Income Summary account will be transferred to the Retained Earnings account. Since the income is a credit balance, it will increase the credit balance of the Retained Earnings account by the same amount. Thus, the Income Summary account will have a credit balance of $2,300 which will be transferred to the Retained Earnings account resulting in a credit balance of $1,300 ($1,000 beginning balance + $2,300 net income). Therefore, the answer is C, which is a credit balance of $1,300.

The Income Statement for the Month of June, 2021 of Camera