Net income is allocated to which two items?
A) Shareholders' equity and cash.
B) Paid-in surplus and dividends.
C) Taxes and dividends.
D) Paid-in surplus and cash.
E) Retained earnings and dividends.

Question

Quizplus · Accepted Answer

Net income is allocated to retained earnings, which is a component of shareholders' equity, and dividends. Retained earnings increase with the portion of net income that is not distributed as dividends, while dividends directly reduce retained earnings when declared and paid.

Net Income Is Allocated to Which Two Items