Question

All of the following statements are true regarding retained earnings except

a.the amount of dividends is added to net loss to arrive at the retained earnings ending balance.
b.the retained earnings beginning balance is usually the retained earnings ending balance from the previous period.
c.the first item normally presented on the statement of stockholders' equity is the balance of retained earnings at the end of the period.
d.the amount of dividends is deducted from net income to arrive at the retained earnings ending balance.

Answer 1

The correct answer is option c.

Step-by-step explanation:

Retained earnings are the part of the revenue which is left after making payments to investors. In other words, it is the part of net income which is left after paying dividends.

It is calculated by adding net income to or subtracting net losses from the previous term's retained earnings and then subtracting net dividend paid to the shareholders.

It is calculated at the end of each accounting period and the retained earnings beginning balance is usually the retained earnings ending balance from the previous period.