Income Summary Account
The income summary account summarizes the revenue and expenses for an accounting period. This account represents the income statement in the ledgers. The income summary is used only at the end of the accounting period.
At the beginning of the closing process, the income summary has no balance. During the closing process, the income summary account is debited and credited for various amounts. At the end of the closing process, the income summary will again have no balance.
Because the income summary clears the balances of the revenue and expense accounts, it is sometimes called a clearing account. Other titles used for this account include Revenue and Expense Summary, Profit and Loss Summary, and Income and Expense Account.
The income summary account has the following characteristics:
- It is different from the other temporary accounts.
- It is used only at the end of the accounting period to summarize the revenue and expense account.
- It does not have a normal balance (because there is no increase or decrease side).
- The balance in the income summary account before and after the closing process is zero.
- The income summary account does not include any financial statement.
