Which statement best describes the retained earnings account?
A) The retained earnings account is equal to the cash account less dividends paid.
B) Retained earnings are funds a company has chosen to reinvest in the operations of a business rather than pay out to stockholders in dividends.
C) Retained earnings represent unused cash of the firm.
D) The retained earnings account is the measurement of all distributed earnings.

Question

Quizplus · Accepted Answer

Retained earnings represent the funds that a company has chosen to keep and reinvest in the operations of a business rather than pay out to stockholders in dividends. It is not equal to the cash account less dividends paid and does not represent unused cash of the firm. It is also not the measurement of all distributed earnings.

Which Statement Best Describes the Retained Earnings Account