Closing entries for a merchandising business are not similar to those for a service business.

Question

Quizplus · Accepted Answer

Closing entries for a merchandising business and a service business are similar in that both involve closing temporary accounts (revenues, expenses, and dividends) to the owner's equity or retained earnings account to prepare the books for the next accounting period. Differences in the specific accounts being closed (such as cost of goods sold for a merchandising business) do not change the overall process of making closing entries.

Closing Entries for a Merchandising Business Are Not Similar to Those