Question

Retained earnings at the end of the period is equal to:

1. retained earnings at the beginning of the period plus profit minus dividends paid.

2. assets plus liabilities.

3. profit plus total assets.

4. retained earnings at the beginning of the period plus profit minus liabilities.

Answer 1

Retained earnings at the end of the period is equal to:

1. This is the correct answer. Retained earnings at the beginning of the period plus profit minus dividends paid.

Assets plus liabilities is twice the total value of Balnace Sheet, so, wrong.

Profit plus total assets is again wrong, as assets are never added to profit.

Retained earnings at the beginning of the period plus profit minus liabilities is also wrong as liabilities can not be deducted from retained earnings.

Retained earnings is the Balance profit from the previous year which increase/decrease by profit/loss and payment of devidend.