Answer: d. Net income is part of the computation for ending retained earnings.
Explanation:
In the statement of owner's equity, Retained earnings are calculated and it is done with the Net Income. This is why when the net income is calculated from the Income Statement it is transfered to the SOE and used to calculate Retained Earnings.
Retained Earnings are calculated by the formula,
Ending Retained = Opening Retained Earnings + Net Income (losses) - Dividends
Net income is added to (or subtracted from if it is a Net loss) the Opening Retained earnings balance. Net dividends are also subtracted.
Answer:
C. Letter C; demand exceeds supply, resulting in a shortage
Explanation:
I had put my answer as A on the test and got it wrong. But this is the correct answer C.
Answer:
d. Ensure that net income or net loss and dividends for the period are closed into the retained earnings account.
Explanation:
Temporary accounts are closed at the end of accounting period so that net income, net loss and dividends for the period are closed into retained earnings account.
All the expenses and gains or income of kind accounts must be closed at the end of the year and in order to close them, they are transferred to either Trading Account or profit and loss Account.