Question

When preparing a journal entry for a transaction that affects retained earnings, the "Retained Earnings" account should not be debited or credited. Instead, the account which ultimately affects retained earnings should be debited or credited.True / False.

Answer 1

Answer:

True

Explanation:

Retained earnings are the net earnings of an entity accumulated over time after payment of dividend. It is that part of earnings that is retain for expansion by the entity.

Generally, retained earnings are not changed by direct posting except it is prior year adjustment. in some entities, the amount that is transferred to retained earnings is system generated. Most transactions that affect retained earnings are debited or credited to account which ultimately affects retained earnings