Income summary definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Income summary can be defined as: Temporary account used only in the closing process to which the balances of revenue and expense accounts (including any gains or losses) are transferred; its balance is transferred to the capital account (or retained earnings for a corporation). Income summary can be called a clearing account because the income summary account is only used for one process there will, or should, be a zero balance in the income summary account before the process and a zero balance in the income summary account after the process. The income summary account is used in the closing process, first closing revenue into the income summary, then closing expenses into the income summary, the result being a balance of net income in the income summary, finally closing the income summary to the capital or retained earnings account resulting in the income summary returning to a zero balance. Note that draws or dividends do not close out to the income summary account.
