Question

In a merchandising company, the only accounts credited during the closing process are expense accounts. True False

Answer 1

False

Explanation

The four closing entries for a merchandising business are as follows

1.Debit each temporary account with a credit balance , such as Sales , for its balance and Credit income summary

2.Credit each temporary account with a debit balance , such as the various expenses and credit income summary , since sales returns and allowances ,sales discount and cost of merchandise sold are temporary accounts with debit balance they are credited for their balances

3.Debit income summary for the amount of its balance(net income ) and credit the owners capital account . The accounts debited and credited are reversed if there is loss

4.Debit the owners capital account for the balance of the drawing account and credit the drawing account

Since there are two more accounts which are credited other than expense so the statement is false

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