The Income Summary account is -
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A. B. C. D.Explanation
The Income Summary account is a temporary account created especially for the closing process and is used only for flowing adjustments and closing entries through.
The Income Summary account is a temporary account.
Temporary accounts are those that are used to track the income, expenses, gains, and losses for a specific accounting period. These accounts are closed at the end of the period and their balances are transferred to the appropriate permanent accounts.
The Income Summary account is used during the closing process of the accounting cycle. It serves as a temporary holding account for the net income or net loss of the company for the period. At the end of the period, the balances of all revenue and expense accounts are closed (transferred) to the Income Summary account.
If the total of the revenue accounts exceeds the total of the expense accounts, the result is net income. In this case, the net income is transferred from the Income Summary account to the retained earnings or owner's equity account. This reflects the increase in the owner's equity due to the profit earned.
On the other hand, if the total of the expense accounts exceeds the total of the revenue accounts, the result is a net loss. In this case, the net loss is transferred from the Income Summary account to the retained earnings or owner's equity account. This reflects the decrease in the owner's equity due to the loss incurred.
Once the transfer is made, the Income Summary account is reset to zero in preparation for the next accounting period. It does not carry over any balances from one period to the next, making it a temporary account.
Therefore, the correct answer is C. a temporary account.