i know the income summary account in the example not needed also no issue.
my question now is how do i know this kind of account should be BS receivable or payable account? i mean when i create in COA.
i know that when it is debit balance then it is receivable whereas otherwise payable. like in this case is i think should be payable.
just like some of the clearing account. when debit balance it is BS receivable.
so my question is to know this kind of clearing account i should create under asset or liabilities category.
date acc dr cr
9/30 rev 1100
income summary 1100
9/30 income summary 1275
9/30 retained earnings 175
income summ 175
Basically you are creating a clearing account and ideally this should have a zero balance at month / year end. Hence, it not matter whether it is created as a Asset Account or a liability account. This question arises if there is a balance at year end and if it has a debit balance and it is created as a liability account.