The beginning inventory is adjusted by crediting Merchandise Inventory and debiting Income Summary.

Question

Quizplus · Accepted Answer

This is a correct adjustment when preparing the closing entries at the end of the accounting period. The Inventory account is credited to reduce its balance to the cost of goods actually sold, and Income Summary is debited to transfer the balance of revenues and gains to Retained Earnings, which increases equity.

The Beginning Inventory Is Adjusted by Crediting Merchandise Inventory and Debiting