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

I don't know

Answer 1

To close the income summary account at the end of an accounting period, you would make an entry that transfers the net income (or net loss) from the income summary to the owner's capital account.

If there is a net income, the entry would be:

• Debit Income Summary
• Credit Owner's Capital Account

So the correct answer from your options would be:

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

This reflects moving the net income (the amount in the income summary) to the owner's capital account, where it increases the owner's equity. If there were a net loss, the entry would be reversed — debit to the owner's capital account and credit to the income summary.