Question

Martinville, Inc. earned revenues of $ 18,000 and incurred expenses of $ 6,500. The company declared and paid cash dividends of $ 1,500. What is the balance in the Income Summary account prior to closing net income or loss to the Retained Earnings​ account?

Answer 1

Answer:

$11,500

Explanation:

The elements of the income statements (revenue and expenses) are usually closed to the income summary.

The revenue account is normally a credit balance and would be closed by debiting it and crediting the income summary while the expense which is usually a debit balance is closed by crediting the account and debiting the income summary.

The dividend declared and paid is a part of the retained earnings and is not closed to the income summary.

Hence the balance in the Income Summary account prior to closing net income or loss to the Retained Earnings​ account

= $18,000 - $6,500

= $11,500