Which account has a balance equal to profit immediately before it is closed?
A)The Capital account
B)The Income summary account
C)The Drawings account
D)The Profit account

Question

Quizplus · Accepted Answer

The Income summary account is used to close temporary accounts such as revenues, expenses, and gains/losses. Once these accounts are closed, their balances are transferred to the Income summary account. The balance of the Income summary account is then transferred to the Capital account, which represents the owner's equity in the business. Therefore, the balance of the Income summary account immediately before it is closed is equal to the profit or loss of the business for the period.

Which Account Has a Balance Equal to Profit Immediately Before