When the Retained Earnings account has a debit balance,it is referred to as a:
A)loss
B)deficit
C)cumulative loss
D)donation of capital

Question

Quizplus · Accepted Answer

Retained Earnings are the accumulated profits of a company that are not distributed as dividends. If this account has a debit balance, it means that the company has accumulated losses over time, indicating a deficit in the Retained Earnings account. Therefore, choice (B) is correct. A loss (choice A) refers to a negative net income for a period, not an account balance. A cumulative loss (choice C) is not a common accounting term. Donation of capital (choice D) is not relevant to this situation.

When the Retained Earnings Account Has a Debit Balance,it Is