The retained earnings balance reported in the balance sheet typically is not affected by:
A) Net income.
B) A prior period adjustment.
C) Dividends paid.
D) Restrictions.

Question

Quizplus · Accepted Answer

Retained earnings represent the accumulated earnings of the company that have not been distributed as dividends to the shareholders. Restrictions, such as legal or contractual requirements, may limit the company's ability to distribute the retained earnings as dividends but they do not affect the balance of retained earnings itself. Net income and dividends paid both increase or decrease the balance of retained earnings, while a prior period adjustment may retroactively adjust the balance of retained earnings.

The Retained Earnings Balance Reported in the Balance Sheet Typically