Final answer:
The assertion that the retained earnings account contains all data necessary to create an income statement is false. The retained earnings only reflect the accumulated net profits and losses after dividends, not the detailed information needed for income reporting.
Step-by-step explanation:
The statement that almost all data necessary to prepare an income statement is contained in the retained earnings account is false. The retained earnings account carries the cumulative amount of net income and dividends over the life of the company, but it does not provide detailed information required for an income statement. The income statement needs data such as revenue, cost of goods sold, expenses, and other income or losses to provide a comprehensive view of a company's performance over a specific period. Retained earnings are actually affected by the income statement as they increase or decrease based on the net income or loss and dividends declared during the period.
To create an accurate income statement, a variety of financial information is required. This includes details on sales, revenue, expenses (both operating and non-operating), taxes, and exceptional items, among others. Each of these items reflects different aspects of a company's financial activity and are not encapsulated by the retained earnings figure alone. Therefore, in order to prepare an income statement, an accountant would need access to general ledger accounts that detail all revenue and expense transactions, not just the summary information in the retained earnings account.