Which one of the following equations represents retained earnings activity for a year?
A)Beginning balance + expenses - dividends = ending balance.
B)Beginning balance + cash receipts - cash payments = ending balance.
C)Beginning balance + dividends - net income = ending balance.
D)Beginning balance + net income - dividends = ending balance.

Question

Quizplus · Accepted Answer

Retained earnings represent the portion of net income that a company retains and reinvests in the business after paying dividends to shareholders. Therefore, the equation that represents retained earnings activity for a year is: Beginning balance + net income - dividends = ending balance. Option D is the only equation that accurately represents this formula.

Which One of the Following Equations Represents Retained Earnings Activity