The Income Summary account is used:
A) To adjust and update asset and liability accounts.
B) To close the revenue and expense accounts.
C) To determine the appropriate withdrawal amount.
D) To replace the income statement under certain circumstances.
E) To replace the capital account in some businesses.

Question

Quizplus · Accepted Answer

The Income Summary account is used to close the revenue and expense accounts at the end of an accounting period. This involves transferring the balances of these accounts to the Income Summary account, which is then closed by transferring its balance to the owner's equity account (such as Retained Earnings). It is not used for adjusting and updating asset and liability accounts, determining withdrawal amounts, replacing the income statement, or replacing the capital account.

The Income Summary Account Is Used