Income Summary has a credit balance of $12,000 in J. Wenger Co. after closing revenues and expenses. The entry to close Income Summary is
A) credit Income Summary $12,000, debit J. Wenger, Capital $12,000.
B) credit Income Summary $12,000, debit J. Wenger, Drawing $12,000.
C) debit Income Summary $12,000, credit J. Wenger, Drawing $12,000.
D) debit Income Summary $12,000, credit J. Wenger, Capital $12,000.

Question

Quizplus · Accepted Answer

The purpose of closing Income Summary is to transfer the net income or loss from the revenue and expense accounts to the owner's equity account. Since Income Summary has a credit balance of $12,000, it means that the revenues exceed the expenses, resulting in a net income of $12,000. To close Income Summary, we need to debit it for $12,000 and credit J. Wenger, Capital for $12,000, which reflects an increase in owner's equity. Therefore, the correct entry is to debit Income Summary $12,000 and credit J. Wenger, Capital $12,000.

Income Summary Has a Credit Balance of $12,000 in J