Final answer:
The Income Summary account is a temporary account used to aggregate revenues and expenses before transferring the net income or loss to the Capital account.
Step-by-step explanation:
The Income Summary account is a temporary account into which revenues and expenses are transferred prior to their final transfer into the Capital account. This account is used to gather all the temporary accounts, like revenues and expenses, at the end of the accounting period.
After these are tallied, the balance (net income or net loss) is transferred to the owner's capital account, reflecting changes in the owner's equity for the period. The temporary nature of this account means it starts each accounting cycle with a zero balance, accumulates data from revenues and expenses during the period, and is cleared to the capital account once the cycle concludes.
This contrasts with permanent accounts, such as Assets and Liabilities on a T-account balance sheet, which carry their balances over into future accounting periods.The account that is a temporary account into which revenues and expenses are transferred prior to their final transfer into the Capital account is called the Income Summary account.