Question

Shareholders' equity includes only retained earnings and the accounts associated with retained earnings.

a)True
b)False

Answer 1

Shareholders' equity includes not only retained earnings, but also other accounts such as common stock, additional paid-in capital, and accumulated other comprehensive income.

Step-by-step explanation:

False. Shareholders' equity includes not only retained earnings, but also other accounts such as common stock, additional paid-in capital, and accumulated other comprehensive income. Retained earnings represent the portion of a company's profits that have been kept or retained instead of being distributed to shareholders as dividends. It is an important component of shareholders' equity, but not the only one.