Question

The steps in the acounting cycle for a merchandising company are the same as those in a service company EXCEPT:

(a) an additional adjusting journal entry for inventory may be needed in a merchandising company.
(b) closing journal entries are not required for a merchandising company.
(c) a post-lcosing trial balance is not required for a merchandising company.
(d) a multiple-step income statement for a merchandising company.

Answer 1

The steps in the accounting cycle for a merchandising company are mostly the same as those in a service company, except for the need for a multiple-step income statement.

Step-by-step explanation:

The steps in the accounting cycle for a merchandising company are mostly the same as those in a service company, but there are a few differences. The correct answer to the question is (d) a multiple-step income statement for a merchandising company. In a service company, the income statement typically only includes revenues and expenses, while in a merchandising company, the income statement includes additional sections for sales returns and allowances, sales discounts, and cost of goods sold.

This is because a merchandising company buys and sells goods, while a service company provides services. The additional sections in the income statement for a merchandising company are needed to properly calculate the gross profit and operating income.

Therefore, the steps in the accounting cycle for a merchandising company are the same as those in a service company, except a multiple-step income statement is needed for a merchandising company.