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If Income Summary Has A Credit Balance Then The Closing Entry For It Will Include What? If Income Summary has a credit balance after Revenues and Expenses have been closed into it, the closing entry for income summary will include a credit to the owner’s capital account as income summary account is closed to capital account in case of sole proprietorship. Income summary has a credit balance means that revenues are greater that expenses, so there is a Net Income / Net Profit for the period. If expenses are greater than revenues, then this is the case of net loss and income summary account has a debit balancee. So, in case of net loss, we credit income summary account and a debit to owner’s capital account in order to transfer it to capital account.  

To Close Drawings Account, We Debited It Or Credited? No, in preparing Closing Entries , the Owner’s Drawings Account will be credited instead of debited as the normal, positive or usual balance of drawings account is debited which is opposite to Owner’s Equity Account , i.e., it is a Contra Capital Account , so it deducted from capital account on balance sheet. So, to close drawings account, we credited it and debit Capital Account  in order to transfer it to owner's capital account as show below: Drawings Closing Entry / The Journal Entry To Close Drawings Account                                                                                 Capital a/c  XXX                              ...

Preparing A Trial Balance (TB) On A Worksheet The information for preparing a Trial Balance on a worksheet is obtained from General Ledger Accounts as from ledger account balances, we prepare trial balance which shows the equality of total of debits and total of credits amounts of different types of accounts. Debit accounts are assets and expenses while credit accounts are liabilities, equity and revenues on a TB. Both Ledgers and TB are the Steps of Accounting Cycle and linked with each other, i.e., after preparing ledger accounts, the next step of accounting cycle is to prepare trial balance from ledger accounts to show arithmetical accuracy of books of accounts. 

Sales Is A Temporary Account In Accounting Sales is a Temporary Account but not a Permanent Account as sales is closed to Income Summary Account at the end of the accounting period. Eventhough the sales account is added to owner’s equity account when solving an accounting equation yet it is not considered as a permanent account as it is the result of operating activities of the owner of the business, so it is added to owner’s equity in case of accounting equation. Firstly, Sales T account is prepared and then it is recorded in Income Statement. At the end of the accounting period, it is closed to income summary account by debited it and credited income summary account. Sales account has not ending balance so it is not transferred neither to Post-Closing Trial Balance nor  to  Balance Sheet .

Capital Account Is A Permanent Account / Is Capital An Income Statement Account Or A Balance Sheet Account? Capital is a Permanent Account and not a Temporary Account . Capital account is a Balance Sheet Account and recorded in the Books of Accounts until the business is closed or goes into liquidation. Capital account is posted to Post-Closing Trial Balance before it is transferred to Balance Sheet . It is a part of Owner’s equity . The opening capital, which is recorded in the current accounting period, is actually the closing capital of previous accounting period transferred to current accounting period. The closing capital, which is  shown on balance sheet, of current accounting period is transferred to the next accounting period.  

Permanent Accounts Are Also Referred To As Real Accounts Permanent Accounts are also called Real Accounts as these accounts include assets, liabilities and owner’s equity accounts. Permanent accounts are recorded in Balance Sheet  as these have balances to be shown on current accounting period and on the next accounting period. Temporary Accounts Are Also Referred To As Nominal Accounts Temporary Accounts are also known as nominal accounts as these consist of expenses, losses, revenues and gains, dividend or drawings accounts. Temporary accounts are recorded in Income Statement and closed to Income Summary Account at the end of the accounting period as these have no balances at the end of the accounting cycle.

Is Allowance For Uncollectible Accounts (Allowance For Doubtful Accounts) Called A Contra Asset Account Or Not? As Allowance for Uncollectible Accounts or Allowance for Doubtful Accounts reduces the balance of Accounts Receivable , so it is called a Contra Asset Account in Accounting. An allowance for uncollectible accounts or allowance for doubtful accounts is the estimated value of uncollectible accounts that a business may not collect from customers in future. After deducting the value of allowance for uncollectible accounts from the ending balance of accounts receivable, we get the Book Value or Net Realizable Value of Accounts Receivable and it is such a value at which the company or corporation is exptecting to receive from customers in future. The normal balance of allowance for uncollectible accounts is credit while the normal balance of accounts receivable is debit. So, allowance for uncollectible accounts is the contra account to its relevant asset account or...