BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Retained earnings is increased by net income and decreased by a net loss
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retained earnings is a component of stockholders’ equity on the balance sheet
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retained earnings is an asset on the balance sheet
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retained earnings represent earnings not distributed to stockholders in the form of dividends
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Detailed explanation-1: -Retained earnings appear in the shareholders’ equity section of the balance sheet. In most financial statements, there is an entire section allocated to the calculation of retained earnings.
Detailed explanation-2: -Retained Earnings is a term used to describe the historical profits of a business that have not been paid out in dividends. It is represented in the equity section of the Balance Sheet. It is a measure of all profits that a business has earned since its inception.
Detailed explanation-3: -Retained earnings are a type of equity and are therefore reported in the shareholders’ equity section of the balance sheet. Although retained earnings are not themselves an asset, they can be used to purchase assets such as inventory, equipment, or other investments.
Detailed explanation-4: -Answer and Explanation: The correct option is (e) Service Revenue. The balance of service revenue is reported on the income statement and not on the retained earnings statement.