Income Summary At Year End

The income summary account is an account that receives all the temporary accounts of a business upon closing them at the end of every accounting period fiscal year fy a fiscal year fy is a 12 month or 52 week period of time used by governments and businesses for accounting purposes to formulate annual financial reports.

Income summary at year end. Using above trial balance prepare closing entries required at december 31 2015. The balance in income summary now represents 37 100 credit 28 010 debit or 9 090 credit balance does that number seem familiar. In our example income summary account has a credit balance because the balance of service revenue earned. A businesses year end however could be any day of any month.

We all know the calendar year ends december 31 each year. At this point you have closed the revenue and expense accounts into income summary. The income summary account is simply a placeholder for account balances at the end of the accounting period while closing entries are being made. The income summary account is a temporary account used to store income statement account balances during the closing entry step of the accounting cycle.

For many businesses their fiscal year mirrors a calendar year and ends on december 31 but just as many businesses use a custom fiscal year that ends in some month other than december. If we closed the accounts as of september 30 we would lose the information we need to do the income statement and statement of retained earnings. Blue company s year end had been set at march 31 200y the income statement account balances at the beginning of the day on april 1 200y would be zero 0. It should income summary should match net income from the income statement.

The net amount transferred into the income summary account equals the net profit or net loss that the business incurred during the period. The income summary account is a temporary account into which all income statement revenue and expense accounts are transferred at the end of an accounting period. Solution 82 500 64 500. A year end income statement presents a summary of a company s revenue and expenses for the 12 months prior to the end of a fiscal year.

A fiscal year fy. If the year end for the company is september 30 2013 the closing entries would be dated october 1 2013. Do not confuse the calender year end with a business year end. The income summary account is only used during the year end closing process it facilitates the transfer of balances away from the temporary accounts and into the permanent accounts.