Is Income Summary An Equity Account

 

Income Summary Account is not an Equity Account as it is a temporary account which is prepared to make a summary of revenues and expenses and also to calculate the difference of revenues and expenses for the period.

An Owner’s Equity or Equity account is prepared to record transactions related with the owners of the business and such transactions are also related with business matters. All contribution of the owners towards the business is considered as an internal liability of the business.

Income summary account is closed to Retained Earnings but equity account is a permanent account and not closed unless the business is closed.

Equity account is shown on balance sheet while income summary account does not appear on any financial statement as it is temporarily prepared after all the financial statements are prepared in order to make summary of all of the revenues and expenses transferred to Retained Earnings Account for the period and also to calculate the differences of revenues and expenses.