The Income Summary account has a $25,000 credit balance after the revenue and expenses accounts have been closed. To which account is this balance closed?
A) Owner's withdrawals
B) Sales revenue
C) Cost of goods sold
D) Retained earnings

Question

Quizplus · Accepted Answer

The Income Summary account's balance is closed to the Retained Earnings account in a corporation or to the owner's capital account in a sole proprietorship. This process finalizes the transfer of net income (or loss) for the period into the equity section of the balance sheet. Since the question does not specify the type of business entity, the most appropriate and generally applicable answer is Retained Earnings, which is used by corporations.

The Income Summary Account Has a $25,000 Credit Balance After