The Income Summary account has a credit balance of $20,000 after the revenue and expense accounts have been closed.Which of the following is to be credited to close the Income Summary account?

Question

Quizplus · Accepted Answer

The Income Summary account is used to summarize the revenue and expenses for the period and determine the net income or loss. To close the Income Summary account, the balance is transferred to Retained Earnings, which is a permanent account on the balance sheet. This is done via a journal entry debiting Retained Earnings and crediting Income Summary for the same amount, in this case $20,000. Therefore, option D, Retained Earnings, is the correct choice to close the Income Summary account.

The Income Summary Account Has a Credit Balance of $20,000