The Income summary account has a $25 000 credit balance after the revenue and expense accounts have been closed.To which account is this balance closed?

Question

Quizplus · Accepted Answer

The Income summary account is used to temporarily hold the net income or net loss for the period before it is transferred to the owner's equity account. In this case, the credit balance of $25 000 indicates that the revenue is greater than the expenses, resulting in a net income. To close the Income summary account, the balance is transferred to the owner's equity account. The best choice for the account to receive this transfer is Capital, which represents the owner's investment in the business.

The Income Summary Account Has a $25 000 Credit Balance