The balance in the retained earnings account is affected by the transfer to that account of:
I Issued share capital
II Dividends paid or provided for
III Transfers to or from other reserve accounts
IV Changes in accounting policies and errors
A) II and III only.
B) I, II and III only.
C) II, III and IV only.
D) I, II, III and IV.

Question

Quizplus · Accepted Answer

The transfer to the retained earnings account is affected by the dividends paid or provided for and transfers to or from other reserve accounts (options II and III). Changes in accounting policies and errors also affect retained earnings (option IV). However, the transfer of issued share capital to the retained earnings account is not a valid entry as share capital represents contributed capital and is not part of the earnings generated by the company (option I). Therefore, the correct answer is option C.

The Balance in the Retained Earnings Account Is Affected by the Transfer