Asked by Chloe Myers on Jul 16, 2024
Verified
When Income Summary has a credit balance and the account is closed:
A) Capital is decreased.
B) Capital is increased.
C) Withdrawals is increased.
D) Revenue is decreased.
Credit Balance
An accounting situation where the sum of credits in an account exceeds the sum of debits, often seen in liability and revenue accounts.
Income Summary
An account used in the closing process that aggregates all revenues and expenses to determine the overall profit or loss.
Capital
The wealth, either financial or other assets, used by an individual or business to fund operations and facilitate growth.
- Familiarize oneself with the method of concluding accounts and its influence on the capital account.
Verified Answer
LN
Lyndsy NoellJul 19, 2024
Final Answer :
B
Explanation :
When Income Summary has a credit balance, it indicates that the company has earned a profit. Closing this account to the owner's capital account increases the capital, reflecting the addition of net income to the owner's equity.
Learning Objectives
- Familiarize oneself with the method of concluding accounts and its influence on the capital account.