The balance in the income summary account before it is closed will be equal to
A) the net income or loss on the income statement.
B) the beginning balance in the retained earnings account.
C) the ending balance in the retained earnings account.
D) zero.

Question

Quizplus · Accepted Answer

The income summary account is used to transfer the balances of revenue and expense accounts at the end of an accounting period. The purpose of closing the income summary account is to get an accurate calculation of the net income or loss that occurred during the period. Therefore, the balance in the income summary account before it is closed will be equal to the net income or loss on the income statement (Choice A). The beginning and ending balances in the retained earnings account (Choices B and C) have no bearing on the balance in the income summary account. The balance in the income summary account will not be zero (Choice D) if there is a net income or loss for the period.

The Balance in the Income Summary Account Before It Is