Question

After posting the entries to close all revenue and expense accounts, the Income Summary account of Cleaver Auto Services has a $5,300 debit balance. This result implies that Cleaver earned a net income of $5,300.

Answer 1

INCORRECT.

In income summary account, all revenue accounts are closed by debiting them and crediting the income summary account. expense accounts are closed by crediting them and debiting income summary account. then on closing income summary account it shows debit balance if there is a net loss and it shows credit balance if there is a net income.

In the given case clever auto services has debit balance of $5,300 i,e it implies that clever auto services has loss .

Therefore above statement is wrong. It implies a loss of $5300 not the net income of $5,300.