Which Statement Relating to Closing Entries Is Incorrect

question 44

Multiple Choice

Which statement relating to closing entries is incorrect?

• A) The closing process is simple with a computerised accounting system.
• B) Closing entries are only made once a year.
• C) Closing entries are made each time a trial balance is prepared.
• D) The need for closing entries arises from the accounting period assumption.

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Definitions:

Economic Value Added (EVA)

A method used to measure a firm’s true profitability. EVA is found by taking the firm’s after-tax operating profit and subtracting the annual cost of all the capital a firm uses. If the firm generates a positive EVA, its management has created value for its shareholders. If the EVA is negative, management has destroyed shareholder value.

Net Operating Profit After Taxes (NOPAT)

A company's operating profit after adjusting for taxes, useful for comparing the profitability of businesses.

Weighted Average Cost of Capital

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted, used to assess the cost of funding new projects.

Taxable Income

The portion of an individual's or company's income used to determine how much tax will be owed to the federal, state, and/or municipal governments.