Question

Which of the following statements is not correct?

multiple choice
When a periodic system is in use, the Purchases account must be credited for its account balance to close this account to the Income Summary account.
When a periodic inventory system is in use, the Merchandise Inventory account is both debited and credited in the closing entry process.
When a periodic system is in use, the Purchases Returns and Allowances, the Purchases Discounts, and the Transportation-In accounts must be debited to close their account balances to the Income Summary account.
When a periodic system is in use, each Purchases, Purchases Return and Allowance, Purchases Discount, and Transportation-In transaction is recorded in a separate temporary account.

Answer 1

When a periodic system is in use, the Purchases Returns and Allowances, the Purchases Discounts, and the Transportation-In accounts must be debited to close their account balances to the Income Summary account.

Step-by-step explanation:

In the case of the periodic system, the following statements are true:

a. While using this method, the purchase would be credited to its balance also the account would be closed by using the income summary account

b. The inventory would be debited and credited while processing the closing entry

c. Also the purchase, purchase return, etc would be recognized as a distinct temporary account