A positive number in the retained earnings account indicates that according to GAAP in the past the firm has earned income excess of all dividends paid.

Question

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This statement is true. Retained earnings represent the portion of net income that a company retains rather than distributing as dividends to shareholders. It is a cumulative balance that reflects the company's historical profits minus any dividends paid out to shareholders. A positive balance in retained earnings indicates that the company has earned more in profits than it has paid out in dividends over time. This is in accordance with Generally Accepted Accounting Principles (GAAP).

A Positive Number in the Retained Earnings Account Indicates That