Question

For a merchandiser, all accounts that affect the determination of income are closed to the Income Summary account. True or False?

Answer 1

False. All accounts that affect the determination of income are closed directly to the retained earnings account in the end for a merchandiser.

Step-by-step explanation:

False.

For a merchandiser, all revenue and expense accounts are closed to Income Summary in order to calculate the net income or net loss for the period. However, the accounts that affect the determination of income, such as sales, cost of goods sold, and operating expenses, are closed directly to the retained earnings account in the end. Income Summary is used as a temporary account to hold the net income or net loss before it is transferred to retained earnings.