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The steps in the accounting cycle for a merchandising company are the same as those in a service company except:

A. Closing entries.
B. Adjusting entries.
C. Posting to the ledger.
D. Preparing financial statements.

1 Answer

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Final answer:

Option (A), The difference between the accounting cycle of a merchandising company and a service company lies in the closing entries related to inventory and cost of goods sold.

Step-by-step explanation:

The steps in the accounting cycle for a merchandising company are mostly similar to those of a service company. The main distinction between the two pertains to how inventory and cost of goods sold are accounted for in a merchandising company. Nevertheless, the direct answer to the question is A. Closing entries. This is because closing entries for a merchandising company include closing out the temporary accounts related to inventory and cost of goods sold, which are not present in a service company.

The process of calculating the merchandise balance and the current account balance involves various steps. Specifically, Step 7 dictates subtracting income payments flowing out of the country from the money coming back in, and providing the result under the Balance column. Step 8 involves recording unilateral transfers negatively under the Balance column. Finally, Step 9 highlights that the merchandise trade balance is derived from the difference between exports and imports of goods.

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