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 is NOT a component of retained earnings?

Net income accumulated over time

Dividends paid to shareholders

Net losses accumulated over time

Additional paid-in capital

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Understand the concept of retained earnings: Retained earnings represent the cumulative amount of net income earned by a company that has not been distributed to shareholders as dividends. It is a key component of equity on the balance sheet.

Identify the components of retained earnings: Retained earnings are affected by net income (positive earnings), net losses (negative earnings), and dividends paid to shareholders, as these reduce the amount retained by the company.

Analyze the options provided: Net income accumulated over time, net losses accumulated over time, and dividends paid to shareholders are all directly related to retained earnings. These components either increase or decrease the retained earnings balance.

Understand the term 'Additional paid-in capital': Additional paid-in capital refers to the amount shareholders pay above the par value of stock during issuance. It is part of equity but is not related to retained earnings.

Conclude that 'Additional paid-in capital' is NOT a component of retained earnings because it is a separate equity account unrelated to the accumulation of net income, losses, or dividends.