Income Summary and Inventory
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After doing all of the closing entries, with the exception of the entry to close the dividends account, the Income Summary Account has a Credit balance of $17, 600.
What does this number represent? Would the answer change depending on the inventory method that we were using?
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Solution Summary
This solution explains the significance of the income summary account with a specific credit balance and also evaluates the three inventory methods use by public and private companies.
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Income Summary/Inventory
After doing all of the closing entries, with the exception of the entry to close the dividends account, the Income Summary Account has a Credit balance of $17, 600.
Temporary account in which revenues and expenses are closed at the end of the year. Income summary shows the net income or net loss for the year since total revenue and total expenses have been closed to it. The resulting profit or loss is then transferred to retained earnings.
http://www.answers.com/topic/income-summary as retrieved on 16 Jan 2008 09:05:29 GMT.
Thus this credit balance of $17600 represents retained earnings and its surplus or profit as there is a credit balance. Thus this will be added to the to retained earnings.
What does this number represent? Would the answer change depending on the inventory method that we were using?
This number represents retained earnings. Yes this can change by the inventory valuation methods. I understand that there are FIFO, LIFO, and average cost as a few methods of inventory valuation to select ...
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