Retained earnings are increased when cash is received from customers in payment of previously recorded accounts receivable.

Name: Retained earnings are increased when cash is received from customers in payment of previously recorded accounts receivable.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Receiving cash from customers for accounts receivable does not affect retained earnings; it only changes the composition of assets from accounts receivable to cash. Retained earnings are affected by net income, dividends, and prior period adjustments.

Retained Earnings Are Increased When Cash Is Received from Customers