Which of the Following Is True About Closing the Books

question 107

Multiple Choice

Which of the following is true about closing the books of a corporation?

• A) Expenses are closed to the Expense Summary account.
• B) Revenues and expenses are closed to the Income Summary account.
• C) Only revenues are closed to the Income Summary account.
• D) Revenues, expenses, and the Dividends account are closed to the Income Summary account.

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Definitions:

Net Working Capital

The difference between a company's current assets and current liabilities, indicating the company's short-term liquidity and financial health.

Net Present Value (NPV)

A financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time, used to assess the profitability of an investment or project.

Net After-Tax Salvage Value

The estimated value of an asset at the end of its useful life, after subtracting any taxes associated with its disposal.

Operating Cash Flow

The cash generated from normal business operations, reflecting the company’s ability to generate sufficient revenue to cover its operational expenses.