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    mlmlr's Avatar
    mlmlr Posts: 2, Reputation: 1
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    #1

    May 2, 2009, 09:04 PM
    Closing an Income Summary
    When closing an income summary, what do I debit and what do I credit? Do I debit cash and credit income summary?
    ROLCAM's Avatar
    ROLCAM Posts: 1,420, Reputation: 23
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    #2

    May 3, 2009, 03:25 AM

    DEBIT Profit and Loss Account.
    CREDIT Retained Earnings Account.

    Cash does not feature at all.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #3

    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.
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