The primary concern in determining whether retained earnings is correctly disclosed on the balance sheet is
A) correct calculation of the net income or loss for the year.
B) correct calculation of dividend payments for the year.
C) whether prior-period adjustments have been made correctly.
D) whether there are any restrictions on the payment of dividends.

Question

Quizplus · Accepted Answer

The primary concern in determining whether retained earnings is correctly disclosed on the balance sheet is whether there are any restrictions on the payment of dividends. Retained earnings represent the portion of a company's profit that is not distributed to shareholders as dividends, but is instead kept by the company for various purposes, such as reinvestment in the business, debt reduction or future dividend payments. If there are any limitations on the payment of dividends, such as legal restrictions or contractual obligations, then the retained earnings balance may need to be adjusted to reflect these restrictions. This is important for investors and creditors to know, as it affects the company's ability to generate returns or fulfill financial obligations.

The Primary Concern in Determining Whether Retained Earnings Is Correctly