If a corporation reports a net income, it should be closed to retained earnings.If it reports a loss, it should be closed to the contributed surplus account.

Name: If a corporation reports a net income, it should be closed to retained earnings.If it reports a loss, it should be closed to the contributed surplus account.
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Question

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Net income increases retained earnings, and a net loss decreases retained earnings. Losses are not closed to the contributed surplus account; they also affect retained earnings.

If a Corporation Reports a Net Income, It Should Be