[phlirtygal]

When I sell capital stock for cash, is that money considered a revenue along with my earned income in the closing entries for my income summary?

[decisionsupport]

Capital stock are balance sheet items. When you issue for instance common stock, you debit cash and credit the common stock account. Any cash received in excess of par is dropped into Additional Paid in Capital. All stays within the balance sheet accounts.

You essentially have 3 steps when it comes to income summary.

1) you debit your revenue accounts and credit income summary for that total.

2) you credit all your expense accounts and debit income summary for that total

3) you debit income summary and credit your retained earnings account with net income.

Remember issuing capital stock is a financing activity and affects the cash flow statement and balance sheet and has nothing to do with operational activities, which is what the income statement is for.

Hope this is helpful.

Vital Knowledge

[decisionsupport]

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