Closing Revenue to the Income Summary
This is the first step in the closing procedure. Transfer the balance from the revenue account to the income summary.
The closing entry is:
- Debit each revenue account for the amount of its balance.
- Credit the income summary for the total revenue.
The following example illustrates the procedure for sale of goods totaling $2,000.
Step 1: Analysis
- Sale of goods is a Revenue Account.
- Income Summary is a Temporary Owner’s Equity Account.
- The Sales Account balance is decreased by $2,000 to zero. The amount $2,000 is transferred to the Income Summary account.
Step 2: Debit – Credit Rule:
- Deceases in Revenue account are recorded as debits. Debit sales for $2,000.
- The revenue income is transferred to the Income Summary account. Credit Income Summary for $2,000.
Step 3: Make a Journal Entry
