Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Retained Earnings

Financial Accounting

12. Stockholders' Equity

Retained Earnings

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Multiple Choice

Which item is transferred from the income statement to the statement of retained earnings?

Total assets

Dividends declared

Net income

Cash flows from operations

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Understand the relationship between the income statement and the statement of retained earnings. The income statement reports a company's revenues and expenses, resulting in net income or net loss. The statement of retained earnings starts with the beginning retained earnings balance, adds net income (or subtracts net loss), and subtracts dividends to calculate the ending retained earnings balance.

Identify the key item that connects the two statements. Net income is the result of the income statement and is transferred to the statement of retained earnings as it directly impacts the retained earnings balance.

Eliminate the other options: Total assets are reported on the balance sheet, not the income statement or retained earnings statement. Dividends declared are subtracted in the statement of retained earnings but are not transferred from the income statement. Cash flows from operations are part of the statement of cash flows, not the income statement or retained earnings statement.

Recognize that net income is the correct item transferred from the income statement to the statement of retained earnings because it represents the company's profitability and directly affects retained earnings.

Conclude that the correct answer is net income, as it is the only item that flows from the income statement to the statement of retained earnings.