How is the Income Summary account used? Is it a temporary or permanent account?
Income summary account records the revenues and expenses for the period, to estimated net income or loss. It is a permanent account.
Closing processes are required at the end of the year. It includes the journalizing and posting the entries to close revenues, expenses, income summary and dividends accounts.
Net income or loss measured in income summary account is transferred to retained earnings account, which is reported in the balance sheet.
Refer to the Practice Set data provided in Chapters 2 and 3 for Crystal Clear Cleaning.
1. Prepare a worksheet (optional) at November 30, 2018. Use the unadjusted trial balance from Chapter 2 and the adjusting entries from Chapter 3.
2. Prepare an income statement and statement of retained earnings for the month ended November 30, 2018. Also prepare a classified balance sheet at November 30, 2018, using the report format. Assume the Notes Payable is long-term. Use the worksheet prepared in Requirement 1 or the adjusted trial balance from Chapter 3.
3. Prepare closing entries at November 30, 2018, and post to the accounts. Open T-accounts for Income Summary and Retained earnings. Determine the ending balance in each account. Denote each closing amount as Clos. and each account balance as Balance.
4. Prepare a post-closing trial balance at November 30, 2018.
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