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mlmlr
May 2, 2009, 09:04 PM
When closing an income summary, what do I debit and what do I credit? Do I debit cash and credit income summary?

ROLCAM
May 3, 2009, 03:25 AM
DEBIT Profit and Loss Account.
CREDIT Retained Earnings Account.

Cash does not feature at all.

morgaine300
May 4, 2009, 01:13 AM
You debit the Income Summary account if it has a credit balance. Closing an account means reversing out the balance. Once you have closed all your revenues and expenses, you'll have a balance in that Income Summary account. If you have a net income (versus net loss), you'll have a credit balance in that account. So to close it, you debit it.

The credit is retained earnings if you're doing a corporation. It's capital if you're doing a sole proprietorship.

If you have a net loss, you'll do the exact opposite.