Which Statement Relating to the Profit or Loss Summary Account

question 2

Multiple Choice

Which statement relating to the profit or loss summary account is incorrect?

• A) The balance in each income and expense account is transferred to the profit or loss summary account.
• B) The profit or loss summary account is a permanent account.
• C) The profit or loss summary account is established to summarise the balances in the income and expense accounts.
• D) The balance in the profit or loss summary account is transferred to the owner's capital account.

---

Definitions:

Contract Rate

The interest rate stated in a loan or lease agreement, dictating the rate at which interest accrues on the outstanding principal.

Bond Premium

The excess of a bond's market price over its principal amount or nominal value.

Straight-line Method

A strategy for computing depreciation or amortization through evenly apportioning the cost of an asset across its expected useful duration.

Semiannual Interest

Interest that is calculated and paid twice a year, commonly found in bonds and loans.