Explain the account called "Retained Earnings". What does it represent? What causes it to increase? What...

Explain the account called "Retained Earnings". What does it represent?

What causes it to increase?

What causes it to decrease?

Expert Solution

Solution:
	Retained earnings are the portion of Net income left after payment of dividends if any, accumulated as reserve during profitable period operations of business of Entity/Company. It is used by the organization for payments of dividends in coming years or reinvested in business operation in the form of Working capital, capital expenditure, or settlement of debt obligation.




	Retained Earnings are represents as portion of Stockholder's Equity and it is shown under Stockholders' Equity in Balance sheet of the Entity/Company.


	Closing Retained Earnings = Beginning Period Retained Earnings + Net Income or - Net Loss – Cash Dividends – Stock Dividends


	# Credits Causes to increase in retained earnings like Net income for the period , Prior period adjustment for understatement of net income.


	# Debits Causes to decrease in retained earnings like Net Loss , Prior period adjustment for overstatement of net income , Cash and stock dividends , Sale of treasure stock below cost.


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jeff jeffy answered 2 years ago

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