Accounting, Binder Ready Version: Tools for Business Decision Making - Standalone book
Accounting, Binder Ready Version: Tools for Business Decision Making - Standalone book
6th Edition
ISBN: 9781119191674
Author: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
Publisher: WILEY
Question
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Chapter 5, Problem 1Q

(a)

To determine

Explain whether the steps in accounting cycle for a merchandising company differs from the steps in the accounting cycle for a service company.

(a)

Expert Solution
Check Mark

Answer to Problem 1Q

No, the steps in accounting cycle for a merchandising company does not differ from the steps in the accounting cycle for a service company.

Explanation of Solution

Accounting cycle refers to the process of recording, posting, and preparing financial statements of a company. It shows the processing of the financial transactions in sequence that starts from occurrence of the transactions and ends with the preparation of financial statements.

The steps in the accounting cycle that is same for both Merchandise Company, and Service Company are stated below:

  • Analyze and record transactions in the journal.
  • Post the journals entries to the ledger (T-accounts).
  • Prepare a trial balance.
  • Prepare financial statements.
  • Prepare closing entries.

 (b)

To determine

Explain whether the measurement of net income in a merchandising company conceptually the same as in a service company.

 (b)

Expert Solution
Check Mark

Answer to Problem 1Q

Yes, the measurement of net income in a merchandising company is conceptually same as in a service company.

Explanation of Solution

The net income in both the companies is derived by deducting all the expenses from the total revenue earned during a year.

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Chapter 5 Solutions

Accounting, Binder Ready Version: Tools for Business Decision Making - Standalone book

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