Income Summary Account Journal Entries And T Account

 

Here, we will study about journal entries related to Income Summary Account and then record these entries in its t account or general ledger’s account.

As we know that an income summary t account (which is a temporary account) is prepared to close all the revenues and expenses accounts i.e., temporary accounts at the end of the accounting period. So, there are three possible entries related to the income summary account.

1. Closing All Revenue Accounts

The first entry is related with transferring of revenues accounts to income summary account in order to close revenue accounts for the period.

The entry to record is shown below:

Closing Revenue Accounts Journal Entry

                                   Revenue a/c  XXX

 

                                                          Income Summary a/c  XXX

 

                                                          (Revenue Accounts Are Closed)

 

2. All Expenses Accounts Are Closed

Since the balance of expenses is debit, so to close these accounts, we credit these in order to transfer these as shown below:

Closing Entry For Expenses

                                   Income Summary a/c  XXX

 

                                                                       Expenses a/c  XXX

 

                                                         (Expenses Transferred)

 

3. When Income Summary Account Is Closed

When the credit side of income summary t account is greater than credit side, then we have a credit balance of income summary account representing a net profit or net income. On the other hand, there is a debit balance representing a net loss for the period.

Suppose, we find that the credit balance of income summary account, then to close it we need to debit it. As income summary account is closed to Retained Earnings Account, so we record the following entry in case of net profit:

Income Summary Closing Entry

                                       Income Summary a/c  XXX

 

                                                                           Retained Earnings a/c  XXX

 

                                  (Income Summary Account Is Closed To Retained Earnings Account)

 

So, these are the journal entries related with income summary account which is a temporary account or clearing account as it is prepared on temporary basis in order to close the temporary accounts (Revenues & Expenses) at the end of the fiscal period and then, finally it is also closed to retained earnings account for the period.

Now, we record all of the above journal entries in income summary t account as shown below:

 

                                                                      ABC Company

                                                           Income Summary Account 

                                                                     For The Period

Date            Particulars                    Rs.                      Date           Particulars               Rs.

December                                                                December

 

31^st                Expenses                300000                    31^st             Revenues           700000

 

31st             Retained Earnings    400000

                                                         ________                                                                   ________

 

Total                                                700000                  Total                                         700000

                                                        _________                                                                  ________

                                                        _________                                                                  ________