On the statement of retained earnings:
A)a net loss decreases retained earnings.
B)net income decreases retained earnings.
C)dividends declared increase retained earnings.
D)a deficit ending balance in retained earnings is not allowed.

Question

Quizplus · Accepted Answer

A net loss decreases the amount of earnings that can be retained by the company, therefore decreasing the balance of retained earnings. Option B is incorrect because net income increases the balance of retained earnings. Option C is incorrect because dividends declared are distributions of earnings and decrease the balance of retained earnings. Option D is incorrect because a deficit ending balance in retained earnings is possible and represents a negative balance of accumulated earnings.

On the Statement of Retained Earnings