Which of the following would eventually cause Retained Earnings to increase?
A)Receiving cash for services provided in a prior month
B)Incurring utilities that will be paid for next month
C)Receiving cash for services to be provided next month
D)Performing services for which cash will be received next month

Question

Quizplus · Accepted Answer

Revenue and expense accounts are subcategories of Retained Earnings,which is a stockholders' equity account.Net income increases Retained Earnings.Since net income equals the excess of revenues over expenses,eventually,revenues will increase Retained Earnings and expenses will decrease Retained Earnings.Receiving cash for services provided in a prior month,or to be provided in a later month,does not impact Retained Earnings.Providing services in the current month which will be received in cash at a later date increases Retained Earnings.

Which of the Following Would Eventually Cause Retained Earnings to Increase