Asked by Dominic Gomez on Jul 14, 2024
Verified
The Income Summary account is used to:
A) Adjust and update asset and liability accounts.
B) Close the revenue and expense accounts.
C) Determine the appropriate dividend amount.
D) Replace the income statement under certain circumstances.
E) Replace the Retained earnings account in some businesses.
Income Summary
An account used in the closing process during the accounting cycle that summarizes the results of operations—revenues and expenses—before transferring the net income or loss to the owner's equity.
Revenue
The total amount of money generated by the sale of goods or services related to a company's primary operations before any expenses are deducted.
Expense Accounts
Expense accounts are used in accounting to track money spent or costs incurred in a company's operations.
- Comprehend the process of preparing closing entries and their importance within the accounting cycle.
Verified Answer
SD
Sydney DeVogtJul 16, 2024
Final Answer :
B
Explanation :
The Income Summary account is used to close the revenue and expense accounts at the end of an accounting period. The balances of these accounts are transferred to the Income Summary account, which is then closed to Retained Earnings or to Dividends.
Learning Objectives
- Comprehend the process of preparing closing entries and their importance within the accounting cycle.