What may be included in the entry to close the income summary account?

Question

Debit to the owner's capital account and credit to income summary

Debit to income summary and credit to cash

Debit to cash and credit to income summary

Debit to income summary and credit to the owner's capital account

Answer 1

The correct entry to close the income summary account is:

Debit to income summary and credit to the owner's capital account.

This entry transfers the net income (or loss) from the income summary account to the owner's capital account, effectively closing out the income summary for the period. If there is a net income, the income summary will be debited, and the owner's capital account will be credited. If there is a net loss, this entry would be reversed.