State BPA Fundamental Accounting Practice Exam

What is closed into the income summary at the end of a fiscal period?

1. Expense accounts

2. Revenue accounts

3. Asset accounts

4. Liability accounts

The correct answer is: Revenue accounts

At the end of a fiscal period, the income summary is used as part of the closing process to summarize and transfer the balances of temporary accounts to retained earnings. The revenue accounts are closed into the income summary to reflect the total income earned during that period. When revenue accounts are closed, their balances are zeroed out, and the totals are aggregated into the income summary. This allows for a clear calculation of net income or loss for the period, as the income summary will contain both the total revenues and total expenses, enabling the calculation of net income (revenues minus expenses). By closing revenue accounts into the income summary, the financial statements can accurately reflect the company's performance over the fiscal period when they are ultimately prepared. This is a key part of the accounting cycle, helping to prepare the accounts for the next period by resetting temporary accounts.