In the statement of cash flows, retained earnings are handled through the adjustment of which two accounts?
A) Revenue and cost.
B) Assets and liabilities.
C) Depreciation and purchases.
D) Net profits and dividends.

Question

Quizplus · Accepted Answer

Retained earnings are adjusted through the net profits and dividends accounts. The net profits account reflects the profits earned during the period, which increases the retained earnings balance, while the dividends account reflects the dividends paid out to shareholders, which decreases the retained earnings balance.

In the Statement of Cash Flows, Retained Earnings Are Handled