When Closing the Income Summary Account When There Is a Net

question 117

Multiple Choice

When closing the Income Summary account when there is a net loss,

• A) Capital would increase.
• B) Capital would decrease.
• C) Capital would remain the same.
• D) None of these are correct.

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Definitions:

Periodic Inventory System

An inventory system where inventory levels are updated at specific intervals, typically through physical counts.

Net Method

A technique for accounting where discounts for early payment are assumed to be taken and recorded as such.

Returned Merchandise

Items that have been sold and subsequently returned by the customer to the seller due to defects, dissatisfaction, or other reasons.

Inventory Returns Estimated

An estimate of the value of goods that are anticipated to be returned by customers, used for accounting and inventory management purposes.