Which of the following describes a retained earnings deficit?

Question

Quizplus · Accepted Answer

A retained earnings deficit occurs when the total accumulated earnings of the company are negative. This can happen if the company experiences losses for multiple years or if it distributes dividends that are greater than its net income. Option A is incorrect because the relation between total share capital and retained earnings does not necessarily define a retained earnings deficit. Option C is incorrect because a loss for the year may or may not result in a retained earnings deficit depending on the previous balance. Option D is incorrect because not paying dividends does not necessarily lead to a retained earnings deficit.

Which of the Following Describes a Retained Earnings Deficit