Which of the Following Statements Regarding the Effect of a Net

question 96

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 post -closing retained earnings will be smaller than the pre-closing retained earnings.
• B) When closing journal 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 being closed will be greater than the amount of expenses to be closed in the closing process.

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Definitions:

Private Benefits

The gains or advantages that accrue directly to an individual or firm from an economic transaction or activity, not affecting others not involved in the transaction.

Negative Externality

A cost that affects a party who did not choose to incur that cost, often associated with production or consumption of goods and services.

Property Value

The market worth of real estate, influenced by factors such as location, amenities, and the condition of the property.

External Cost

A cost that is not borne by the parties to an economic transaction, often affecting third parties who did not choose to incur that cost.