Which of the Following Is Not True About Closing Entries

question 91

Multiple Choice

Which of the following is not true about closing entries?

• A) There are four closing entries that update the stockholders' equity account.
• B) After the second closing entry, the income summary account is equal to the net income or loss for the period.
• C) All real accounts are closed at the end of the period.
• D) By closing nominal accounts at the end of the period to zero, it is possible to isolate next period's information correctly.

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Definitions:

Actual Overhead

The real costs incurred for overhead in a given period, compared against budgeted or standard overhead costs for variance analysis.

Work in Process Inventory

Goods partially completed during the manufacturing process, not yet ready for sale.

Underapplied Overhead

A situation where the allocated overhead cost is less than the actual overhead incurred, leading to a discrepancy in accounting records.

Cost of Goods Sold

The expenses directly related to the manufacturing of goods a company sells.