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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Closing entries

Prior to its closing, Income Summary had total debits of $1,190,500 and total credits of $1,476,300.

Briefly explain the purpose served by the income summary account and the nature of the entries that resulted in the $1,190,500 and the $1,476,300.

To determine

Closing entries

Closing entries are recorded in order to close the temporary accounts such as incomes and expenses by transferring them to the permanent accounts such as retained earnings. It is passed at the end of the accounting period, to transfer the final balance.

The uses of income summary account.

Explanation

Income summary account is used to close the temporary account such as, income and expense account. It helps in deducting errors and correcting the errors.

According to the question, total revenue balance is $1,476,300 and total expense balance is $1,190,500. Both the temporary account must be closed and the balance would be transfer to permanent account.

Calculate net income:

Net income = (Total revenues

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