(3) Income summary balance, which equals net income or net loss, is transferred to the retained earnings account. In the closing stage, balances in all income accounts are transferred to the income summary account … Income summary is temporary account used to close all income and expense accounts by the end of the period 2. B. Get 1:1 help now from expert Accounting tutors The final step would be to close this Income Summary account. close the drawing account. 1. Fill in the blanks. In small business accounting, accounts may be either permanent or temporary. Rather than closing the revenue and expense accounts directly to Retained Earnings and possibly missing something by accident, we use an account called Income Summary to close these accounts. At this point all revenue and expense accounts have a zero balance. The net balance of the income summary account is closed to the retained earnings account.. The $1,190,500 represents the , and the $1,476,300 represents . A common example is an income summary statement with revenue and expenses, which are usually transferred to a retained earnings account … All revenues accounts are debited, and the Income Summary account is credited for the total of the debits. The balance in the income summary account before it is closed will be equal to 74. Expert Answer 100% (1 rating) Previous question Next question Get more help from Chegg. The company had of $. Revenue, expenses, and withdrawals are examples of assets, liabilities and the owner's capital account. Income Summary is a temporary account only used for the closing process that contains a credit for total revenues (and gains) and debit for total expenses (and losses). The Income Summary account is used to: close the revenue accounts only. After closing entries are posted, the balance in the owner's capital account in the ledger will be equal to 75. 3. income summary in temporary accounts will not be carried over to the next accounting period 4. One of the major differences between the income summary and the income statement has to do with permanence. This is used to close out accounts at the end of the period. The income summary account is used to the accounts. close revenue accounts and expense accounts and update the owner's capital account. Income Summary allows us to ensure that all revenue and expense accounts have been closed. Debit the income summary for that amount and credit the retained earnings account on the balance sheet. Income summary account is a temporary account used in the closing stage of the accounting cycle to compile all income and expense balances and determine net income or net loss for the period. close the revenue accounts and expense accounts only. You credit expenses for $225,000 and debit the income summary account for an equal quantity. Using Income Summary in Closing Entries. The income statement for the month of June, 2012 of Camera Obscura … It’s called a “clearing account” because it’s used as a temporary account with costs or amounts that are to be transferred to another account. Then all expense accounts are credited, and the Income Summary account is debited for the total of all credits. This leaves you with $75,000 net profits in the income summary account. An income summary is a temporary account designed to close out entries for an accounting period and then report those figures to retained earnings. Since our total revenues from the first step were $3,950 and total expenses were $2,530, the balance of this account would be 3,950 – 2,530 or $1,420 and it represents Net Income because the revenues are greater than expenses. Close the income summary account.