Question

The ending balance in Retained Earnings is found on:

a) Only the balance sheet
b) Both the statement of retained earnings and the balance sheet
c) Both the income statement and the balance sheet
d) Only the statement of retained earnings\

Answer 1

The ending balance in Retained Earnings is found on both the statement of retained earnings and the balance sheet, where it is included under the equity section after adjustments for net income and dividends. The correct option is B.

Step-by-step explanation:

The ending balance in Retained Earnings is found on both the statement of retained earnings and the balance sheet.

The statement of retained earnings is a financial statement that specifically shows how the retained earnings balance changes from the beginning to the end of a period due to net income and dividends.

After these adjustments, the ending balance of retained earnings is reported on the balance sheet under the shareholders' equity section.

Here's a step-by-step explanation of where you would see the ending balance in Retained Earnings:

1. The company earns net income, which is reported on the income statement.
2. Net income is added to the beginning balance of retained earnings on the statement of retained earnings.
3. Any dividends paid out to shareholders are then subtracted on the statement of retained earnings.
4. The resulting figure is the ending balance in retained earnings, which is carried over to the balance sheet under the equity section. The correct option is B.