Which of the Following Statements Regarding the Effect of a Net

question 70

Multiple Choice

Which of the following statements regarding the effect of a net loss on the closing process is true?

• A)If a company has a net loss during the current accounting period,then the ending retained earnings will be smaller than the beginning retained earnings.
• B)When closing entries are prepared,contributed capital is debited if a company has a net loss.
• C)If a company has a net loss,the closing entry will include debits to the revenue accounts,credits to the expense accounts,and a credit to Retained earnings.
• D)If a company has a net loss,the amount of revenues to be closed will be greater than the amount of expenses to be closed in the closing process.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales over a certain period, such as rent, salaries, and insurance.

Financial Advantage

The benefit gained from making a particular financial decision, often represented by gains in revenue or reductions in costs.

Traceable Fixed Costs

Constant expenses directly associated with a particular product line or business division.

Net Operating Income

The total profit of a company after operating expenses are subtracted from operating revenues but before incomes and taxes are accounted for.