BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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retained earnings are not impacted
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retained earnings are decreased
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retained earnings are increased
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one cannot determine the impact on retained earnings without additional information
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Detailed explanation-1: -If revenues are less than expenses, the company has a net loss and Retained Earnings decreases. If revenues are greater than expenses, the company has net income and Common Stock increases. If revenues are less than expenses, the company has a net loss and Common Stock increases to balance off the loss.
Detailed explanation-2: -Dividends can be distributed in the form of cash or stock. Both forms of distribution reduce retained earnings. Cash payment of dividends leads to cash outflow and is recorded in the books and accounts as net reductions.
Detailed explanation-3: -When expenses exceed revenues, the company has a net loss. Report it on a company’s income statement. Net income is an important measure of a company’s profitability and financial performance for the relevant fiscal period. Also, call it net earnings, net profit, or the bottom line.
Detailed explanation-4: -An expense will decrease a corporation’s retained earnings (which is part of stockholders’ equity) or will decrease a sole proprietor’s capital account (which is part of owner’s equity).