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 of the following statements about an accumulated deficit are correct?

It indicates that a company has paid more dividends than it has earned in profits.

It is reported as a liability on the balance sheet.

It results from cumulative net losses over time.

It represents a negative balance in retained earnings.

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Verified step by step guidance

Understand the concept of accumulated deficit: An accumulated deficit occurs when a company's retained earnings account has a negative balance, typically due to cumulative net losses over time.

Clarify the incorrect statement: 'It indicates that a company has paid more dividends than it has earned in profits' is not correct because an accumulated deficit is primarily caused by net losses, not dividend payments.

Clarify the incorrect statement: 'It is reported as a liability on the balance sheet' is not correct because an accumulated deficit is part of the equity section under retained earnings, not a liability.

Identify the correct statement: 'It results from cumulative net losses over time' is correct because an accumulated deficit reflects the total losses a company has incurred over time exceeding its profits.

Identify the correct statement: 'It represents a negative balance in retained earnings' is correct because an accumulated deficit is shown as a negative amount in the retained earnings account within the equity section of the balance sheet.