All of the following statements regarding retained earnings are true exceptA. retained earnings represents a claim on cash. B. a debit balance in Retained Earnings indicates a deficit. C. retained earnings is net income that a company retains in a business. D. some companies may restrict availability of retained earnings for dividends.

Question

Business

Iris George

16 December, 06:15

All of the following statements regarding retained earnings are true exceptA. retained earnings represents a claim on cash. B. a debit balance in Retained Earnings indicates a deficit. C. retained earnings is net income that a company retains in a business. D. some companies may restrict availability of retained earnings for dividends.

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Crystal Wilson · Answer 1

A) retained earnings represents a claim on cash.

Explanation:

Retained earnings are the accumulated profits that a company keeps that are left after dividends are paid. Retained earnings are the equivalent of a savings account for an individual. Retained earnings are shown in the balance sheet as part of owners' equity.

For example, corporation A had a net profit of $10 million during last year, and it paid dividends for a total of $4 million, its retained earnings for last year are $6 million.

Companies use retained earnings as money available for financing new or existing projects.