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 or false?

Answer 1

Answer:

True

Explanation:

As we know that the ending balance of retained earnings is computed by considering the following equation

= Starting balance of retained earnings + net income - dividend paid

Since the net income which is come by subtracting the expenses from the revenue and the dividend paid is debited or credited at the time of passing the journal entries instead of retained earning account because these above accounts are got affected.

Like expenses account are always debited while the income account are always credited