Income Account Type

An Income account will typically have a credit balance. The Income accounts accumulate the amounts received by the company in providing goods or services to its customers.

At the end of the year the Income accounts are cleared to Retained Earnings and start out the beginning of the new year with a balance of zero. During the year the Income accounts would have a balance made up of the accumulated activity to date. For example...

If your accounting year starts on January 1, and you have Sales of $10,000 per month, your account balance in the General Ledger on March 31 will be $30,000. Your account balance in the General Ledger on September 30 will be $90,000. The General Ledger balance is the accumulation of the activity-to-date.

The function of preparing reconciliations is usually targeted at Balance Sheet accounts (Asset, Liability, Equity, Contra-Asset), but with RecWizard you can keep track of special information for Income accounts as well.

During the year there may be unique activity that you will want to keep track of. At year end you will not have to rummage through your records to remember that "once in a career" event that happened last February. Income accounts that you might want to keep track of during the year include:

• Miscellaneous Income – to keep track of items that do not normally fit into your routine business operations so you will be able to explain in detail what these items are when the auditors ask at the end of the year.
• Gain on Sale of Assets – to identify specific assets sold and the proceeds on each sale.

You might also want to document that you have reviewed postings from another system. An example of this would be:

• Comparing the total amount of Sales shown in your billing system with the general ledger balance to make sure all journal entries have been correctly recorded.

NOTE: The reason it is important to classify an account as an Income account for RecWizard purposes is that the “normal balance” will always be a credit.