When preparing the retained earnings statement, ________ is(are) subtracted in order to derive at the ending balance of retained earnings.
A) net profits after taxes
B) interest expense
C) depreciation
D) dividends

Question

Quizplus · Accepted Answer

Dividends are subtracted from the beginning balance of retained earnings to arrive at the ending balance. Retained earnings represent the portion of net income that is not distributed as dividends to shareholders. Interest expense and depreciation are not subtracted from retained earnings as they do not directly affect the amount of earnings retained by the company. Net profits after taxes are a component of retained earnings, but they are not subtracted from the beginning balance. Instead, they are added to the beginning balance to calculate the ending balance.

When Preparing the Retained Earnings Statement, ________ Is(are) Subtracted in Order