Answer to Question #125916 in Accounting for Everlyn

Question

When closing the books, if the balance in the Income Summary account is a credit, the company has experienced a(n):
A. net income
B. net loss
C. exact zero balance
D. None of these options
Explain why the answer is correct.

Answer 1

A. Net Income

Provided that there is a credit balance in the Income Summary, this is the company's Net Income. The Income Summary will be closed by debit for this amount and credited to retained earnings or to the owner’s capital account.