When a company records the year-end closing entries, the Income summary balance, before it is closed to Retained earnings, should be equal to the Net income or Net loss for the year.

Question

Quizplus · Accepted Answer

This is true because the purpose of the Income summary account is to summarize the company's revenue and expense transactions for the year, and the balance of this account represents the company's net income or net loss for the period. When the year-end closing entries are made, the balance of the Income summary account is closed to Retained earnings, which increases or decreases the company's equity in accordance with its net income or loss for the year.

When a Company Records the Year-End Closing Entries, the Income