Restrictions on retained earnings:

Question

Quizplus · Accepted Answer

Restrictions on retained earnings are usually reported in the notes to the financial statements, which provide additional information about the company's financial position and performance. Adjusting journal entries may be necessary to reflect the impact of these restrictions on the financial statements, but they are not considered restrictions themselves. Restrictions on retained earnings are not reported on the income statement, which only shows revenues, expenses, and net income. While restrictions on retained earnings may affect the amount of dividends paid to shareholders, they are typically designed to serve other purposes, such as funding future growth or complying with regulatory requirements.

Restrictions on Retained Earnings