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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Retained earnings is decreased by which of the following?

Net losses

Revenue earned

Purchase of equipment

Issuance of common stock

Previous problemNext problem

Verified step by step guidance

Understand the concept of retained earnings: Retained earnings represent the cumulative amount of net income that a company has retained, rather than distributed as dividends to shareholders. It is affected by net income, net losses, and dividend payments.

Analyze the impact of net losses: Net losses decrease retained earnings because they reduce the overall profitability of the company. This is directly reflected in the retained earnings account.

Evaluate the impact of revenue earned: Revenue earned increases net income, which in turn increases retained earnings. Therefore, revenue earned does not decrease retained earnings.

Consider the purchase of equipment: The purchase of equipment is recorded as an asset and does not directly affect retained earnings. It impacts the balance sheet but does not decrease retained earnings.

Assess the issuance of common stock: Issuance of common stock affects the equity section of the balance sheet but does not impact retained earnings directly. It increases paid-in capital rather than decreasing retained earnings.