The income statement for the month of June, 2010 of Ramirez Enterprises contains the following information: After the revenue and expense accounts have been closed, the balance in Income Summary will be
A) $0.
B) a debit balance of $3,400.
C) a credit balance of $3,400.
D) a credit balance of $7,000.

Question

The income statement for the month of June, 2010 of Ramirez Enterprises contains the following information:  After the revenue and expense accounts have been closed, the balance in Income Summary will be
A) $0. 
B) a debit balance of $3,400. 
C) a credit balance of $3,400. 
D) a credit balance of $7,000.

Quizplus · Accepted Answer

Income Summary is a temporary account used to close out revenue and expense accounts at the end of an accounting period. It reflects the net income or net loss for the period. In this case, the total revenue is $7,000 and the total expenses are $3,400, resulting in a net income of $3,600. Therefore, Income Summary will have a credit balance of $3,600, which represents the net income for the period. However, the answer choices do not include $3,600, so the closest option is choice C, which is a credit balance of $3,400.

The Income Statement for the Month of June, 2010 of Ramirez