Which of the following accounts would not be closed to owners capital at the end of the period
An account that receives all the temporary accounts upon closing them at the end of every accounting period Show
What is Income Summary?The income summary account is an account that receives all the temporary accounts of a business upon closing them at the end of every accounting period. This means that the value of each account in the income statement is debited from the temporary accounts and then credited as one value to the income summary account. There are two sides to the income summary account: the credit and debit sides. A company is said to have made profits if the credit side is higher than the debit side, while losses have been incurred if the debit side is higher than the credit side. After all temporary accounts have been transferred to the income summary account, the balance in each temporary account will be closed and transferred to the capital account for a sole proprietorship or to “retained earnings” for a corporation. Income Summary vs. Income StatementMany people become confused between income summary and income statement since both concepts provide a report of the nets and losses of a company. However, the two are different, and the following points are some of their differences:
How to Close an Account into Income Summary AccountWhen closing the accounts in the income statement, accountants can choose to close them directly and transfer the values to the retained earnings account or transition them to the income summary account before finally transferring them to the retained earnings account. Let us discuss how to do the latter.
Example of an Income Summary AccountLet’s say Company ZED is closing the accounting period and will need to transfer the values in its income statement onto the income summary account. Consider the following table:
The table above contains the values of the revenue and expenses and will be transferred to the income summary account. Each value will be debited and then credited to the account as one value, as shown below:
After the accounts are closed, the income summary is then transferred to the capital account of the owner and then closed.
Purpose of Income SummaryIt is true that revenues and expenses can be transferred directly onto the balance sheet – whether it means putting the values into the retained earnings account or into the capital account. However, transitioning it first into the income summary helps provide an audit trail that will show the company’s net, expenses, and revenue for the year. Additional ResourcesCFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:
Which accounts are not closed at the end of the period?What are permanent accounts? Permanent accounts are accounts that you don't close at the end of your accounting period. Instead of closing entries, you carry over your permanent account balances from period to period.
Which of the following accounts would not be closed to owner's capital at the end of the period?Answer: b.
The owner's capital account is a permanent account and will not be closed at the end of an accounting period. The other three accounts (i.e. owner's drawing account, service revenue account, and insurance expense account) are temporary accounts which will be closed at the end of an accounting period.
Which of the following accounts would be closed at the end of a period?Nominal accounts are accounts that are closed at the end of the accounting period. These accounts are typically the income and expense accounts that are presented in the income statement.
Which of the following accounts will not be closed at the end of the accounting cycle quizlet?Which of the following accounts will not be closed at the end of the accounting cycle? the owner's capital account. to verify that the ledger is in balance at the beginning of the next period.
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