Question

Illustrate your understanding of how to use the adjusted trial balance to prepare a statement of retained earnings by completing the following sentence.

In order to prepare the statement of retained earnings, the balance of the _____________ account balance as well as any debit balance in the ______________ account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the Income statement.

Answer 1

a. Retained earnings

b. Net income

Step-by-step explanation:

The format of the statement of the retained earnings is presented below:

Retained Earning statement

For the year ended

Beginning balance of retained earning XXXXX

Add: Net income XXXXX

Less: Cash Dividend paid XXXXX

Ending balance of retained earning XXXXX

By considering the above items i.e. Beginning opening balance, net income, and the dividend the statement of the retained earnings should be prepared.