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

Retained earnings are a category of which of the following on the balance sheet?

Current assets

Long-term investments

Stockholders' equity

Current liabilities

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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 part of the equity section of the balance sheet.

Review the structure of the balance sheet: The balance sheet is divided into three main sections: assets, liabilities, and stockholders' equity. Retained earnings are not classified as assets or liabilities.

Identify the correct category: Retained earnings are part of stockholders' equity because they represent the portion of profits that belong to shareholders but are reinvested in the business rather than paid out as dividends.

Eliminate incorrect options: Retained earnings are not current assets, long-term investments, or current liabilities. These categories represent different aspects of the balance sheet, such as resources owned by the company or obligations owed.

Confirm the correct classification: Retained earnings are listed under stockholders' equity on the balance sheet, alongside other equity accounts like common stock and additional paid-in capital.