Question

Revenues were $60,000, expenses were $25,000, and withdrawals were $4,000. What would be the balance in the income summary before it is closed to capital?

a. $31,000
b. $31,000 credit
c. $29,000 debit
d. $29,000 credit

Answer 1

The balance in the income summary before it is closed to capital is $31,000.

Step-by-step explanation:

To determine the balance in the income summary before it is closed to capital, you would subtract expenses and withdrawals from revenues:

$60,000 (Revenues) - $25,000 (Expenses) - $4,000 (Withdrawals) = $31,000

So, the correct answer is:

a. $31,000

This represents the net income for the period. If the balance is positive (as it is in this case), it is considered a credit balance. Therefore, you could also express it as:

b. $31,000 credit

This amount would be closed to the owner's capital account as part of the closing entries at the end of the accounting period.