Is Income Summary An Asset Or An Equity Or A Retained Earnings (Short Questions And Answers)

Accounting Treatment

Is Income Summary An Asset

Income Summary is a Temporary Account and it is timely and temporarily prepared in order to close all of the temporary accounts (Revenues, Expenses, Gains and Losses) at the end of the accounting after all of the Financial Statements are prepared. So, it is not an asset account.

Is Income Summary An Equity Account

Income summary is not an equity account. Although it is considered as a temporary account, yet it is a temporarily part of equity account as it is closed to Retained Earnings Account which is also a part of equity account. Also, the closing balance of income summary account must be equal to the Net Profit Or Net Income or the Net Loss which is also the part of equity account, so it can be considered as a temporary part of equity account at the time when temporary accounts are closed, and also to show it as a part of Chart of Accounts but on permanent basis it is not an equity account.

Is Income Summary The Same As Retained Earnings

Income summary account is not the same as Retained Earnings as it is a temporary account. Eventhough, it is considered as a temporary part of equity account yet it is not the same as retained earnings while retained earnings is a permanent account and remains the part of equity account as long the business is in existence.

Is Income Summary Included In Balance Sheet

Since it is a temporary part of the equity account and as its closing balance is transferred to retained earnings, which is a permanent part of equity account, so it is temporarily represented as a Balance Sheet Account at the time when all of the temporary accounts i.e., revenue and expense accounts are closing. However, it does not appear neither on Balance Sheet nor any other financial statement as it is closed to retained earnings at the end of the accounting period.