Question

Which statement is true? Multiple Choice Some Income Statement accounts are Permanent and some Income Statement accounts are Temporary. All Income Statement accounts are Temporary All Income Statement accounts are Permanent

Answer 1

Answer:

The correct answer is all income statement accounts are temporary

Explanation:

Income statement is that part of financial statement set aside for determining profits or losses made in accounting period.

The main reason for preparing income statement is to arrive at the retained earnings which are later posted to the balance sheet.

All accounts in the income statement are temporary as they do not have balances carried forward at the end of a period unlike balance sheet where assets,liabilities and equity  have opening and closing balances.

It is for the reason that inventory when purchased is first debited to the balance sheet and posted to income statement when the profit is to be determined and also closing inventory is immediately transferred back to the balance sheet.

Answer 2

Answer:All Income Statement accounts are Temporary

Explanation:An income statement account is a type of account where all the money coming into the Organisation is recorded, income statement accounts are closed at the end of the financial or accounting period.

Temporary accounts are accounts that are closed every accounting period,they are not carried over or retained,they are reset as a new accounting period is beginning.

Earned interest,Sales discounts,Sales returns,Utilities,Rent etc.