Which of the following describes a retained earnings deficit?

Question

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A retained earnings deficit occurs when the total amount of earnings the company has kept (retained) in the business is negative. This means that the company has accumulated losses over time that are greater than any dividends paid out or other forms of capital contributions. A net loss for the year (A) will contribute to a retained earnings deficit, but it is possible for a company to have a net loss in one year and still have positive retained earnings overall. Choice B is incorrect because it refers to a situation where retained earnings is less than paid-in capital, which is a common scenario for many businesses and does not necessarily indicate a deficit. Choice D is also incorrect because a company that does not pay out dividends may still have positive retained earnings.

Which of the Following Describes a Retained Earnings Deficit