If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a
A) debit to the owner's capital account.
B) debit to the owner's drawing account.
C) credit to the owner's capital account.
D) credit to the owner's drawing account.

Question

Quizplus · Accepted Answer

A credit balance in Income Summary indicates that revenues are greater than expenses, resulting in net income. To close Income Summary, the balance needs to be transferred to the owner's capital account. Since the balance in Income Summary is a credit, the closing entry will need to include a debit to Income Summary (to bring the balance to zero) and a credit to owner's capital (to transfer the balance to their account). Therefore, the correct choice is C.

If Income Summary Has a Credit Balance After Revenues and Expenses