Question

After the Adjusted Trial Balance columns of a work sheet have been totaled, which account balances are extended to the Income Statement columns, which account balances are extended to the Statement of Retained Earnings columns, and which account balances are extended to the Balance Sheet columns?  How is the statement of retained earnings prepared?

Answer 1

1. Revenues and expenses

2. Net income or net loss

3. Assets, liabilities and stockholder equity

Step-by-step explanation:

1. In the income statement, the total revenues and the total expenses are recorded.

If the total revenues are more than the total expenditure then the company earns net income

And, If the total revenues are less than the total expenditure then the company have a net loss

2. This net income or net loss would reflect in the statement of the retained earning account.

3. In the balance sheet, the assets, liabilities, and stockholder equity is recorded. In this the accounting equation is used which is shown below:

Total assets = Total liabilities + stockholder equity

The debit and credit side of the balance sheet should always be equal and balanced.

Moreover, it always is prepared on the specified date.

4. We know that

The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

The preparation of the retained earnings statement is attached in the spreadsheet. Kindly find it.