Question

The Statement of Retained Earnings is used to prepare the:
A. Balance Sheet.
B. Statement of Earnings and Distributions.
C. Statement of Cash Flows.
D. Income Statement.

Answer 1

The Statement of Retained Earnings is used to prepare the Balance Sheet. (Option A)

The Statement of Retained Earnings is prepared after the preparation of Income Statement.

But, Statement of Retained Earnings is prepared before the preparation of Balance Sheet.

The amount of Retained Earnings at the end of the accounting period is obtained after preparation of the Statement of Retained Earnings, which is then included in the Balance Sheet.

Also, Retained Earnings is not related with the Statement of Cash Flows. Retained Earnings are not considered while preparation of Statement of Cash Flows. Cash Flow Statement represents cash and cash equivalents for the accounting period.