After Preparing the Financial Statements for the Current Year,the Accountant

question 88

Multiple Choice

After preparing the financial statements for the current year,the accountant for Exquisite Gems closed the Dividends account at year-end by debiting Income Summary and crediting the Dividends account.What is the effect of this entry on current-year net income and the balance in the Retained Earnings account at year-end?

• A)Net income is overstated and the balance in the Retained Earnings account is correct.
• B)Net income is correct and the balance in the Retained Earnings account is overstated.
• C)Net income is understated and the balance in the Retained Earnings account is correct.
• D)Net income is understated and the balance in the Retained Earnings account is overstated.

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Definitions:

Value Perception

The customer's evaluation of the worth of a product or service based on its ability to meet their needs and expectations.

Revenue Analysis

The examination of income generated from sales, investments, or business operations to understand the financial health and profitability of a business.

Market Share Analysis

An assessment of a company's sales in relation to the total sales in its industry, indicating competitiveness and market dominance.

Profitability Analysis

An assessment method to determine the ability of a business to generate earnings compared to its expenses and other relevant costs.