Question

Prior to closing the accounting records of brand company showed $30,000 of assets, $10,000 of liabilities, $19,500 of retained earnings, $3,000 of revenue, $2,000 of expenses and $500 of dividends. after closing the balance in the retained earnings account will be

Answer 1

Answer: After closing the balance in the retained earnings account will be $20,000.

We arrive at Retained earnings for a given year as follows:

$Retained Earnings = Revenues - Expenses - Dividends$

$Retained Earnings = 3000 - 2000 - 500$

$Retained Earnings = 500$

We then find the closing balance in the Retained Earnings account as follows:

$Closing Balance = Opening Balance + Current year's retained earnings$

$Closing Balance = 19500 + 500$

$Closing Balance = 20,000$