If the retained earnings account increases from the beginning of the year to the end of the year, then
A) net income is less than dividends.
B) net loss is less than dividends.
C) the company must have sold shares.
D) net income is greater than dividends.

Question

Quizplus · Accepted Answer

Retained earnings represent the portion of a company's net income that is kept within the company rather than paid out as dividends to shareholders. Therefore, if the retained earnings account increases from the beginning of the year to the end of the year, it means that the company had net income that was greater than the amount of dividends paid out. So, the correct answer is D - net income is greater than dividends.

If the Retained Earnings Account Increases from the Beginning of the Year