A credit balance in retained profits:
A) equals the balance of cash available for dividends
B) indicates that a profit was earned in the last financial period
C) represents the profits earned and retained in the business
D) indicates that a loss was earned in the last financial period.

Question

Quizplus · Accepted Answer

A credit balance in retained profits represents the profits earned and retained in the business, which means that the company made a profit in the last financial period and chose to keep a portion of it rather than distributing it to shareholders as dividends. It does not necessarily equal the balance of cash available for dividends, nor does it indicate that a profit or loss was earned in the last period.

A Credit Balance in Retained Profits