My teacher said when we do closing entries, we can choose the four steps, namely
Dr I/S
Cr Revenue
Dr Expenses
Cr I/S
Dr I/S
Cr Capital
Dr Capital
Cr Drawings
Or she said we can choose the three steps method by closing revenues and expenses right into the capital account. I was wondering if we can always close revenues and expense right into capital, what is the original purpose of having this temporary account, Income Summary? It's pretty much useless if that's the case.
Is Income Summary account always needed?
2017-09-30 6:24 am
回答 (2)
2017-10-01 8:52 pm
The purpose of the income summary is to show the net income (revenue less expenses) of the business in more detail before it becomes part of the retained earnings account balance.
2017-09-30 9:43 am
Income Summary is an easy way to determine Net Income. But you have your closing entries for revenue and expenses reversed. Revenue is debited, IS is credited. Expense is credited, IS is debited.
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