A Merchandiser Uses a Perpetual Inventory System

question 272

Multiple Choice

A merchandiser uses a perpetual inventory system.The third step in the process of closing the accounts of a merchandiser is to ________.

• A) make the revenue accounts equal to zero via the Income Summary account
• B) make the Income Summary account equal to zero via the Owner, Withdrawals account
• C) make the expense accounts equal to zero via the Income Summary account
• D) make the Income Summary account equal to zero via the Owner, Capital account

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Definitions:

Legal Entity

An organization that has legal rights and obligations, including the ability to enter into contracts and own property.

Stockholders' Equity

The residual interest in the assets of a corporation after subtracting liabilities, representing the ownership interest of shareholders.

Corporation

A business organized under state or federal statutes as a separate legal entity.

Stock Split

A corporate action to increase the number of shares by dividing each share, which decreases its price and makes it more accessible to investors without changing the market capitalization.