Question

Which of the following statements about the statement of retained earnings and the statement of stockholders' equity are true? A statement of retained earnings shows how net income increased and dividends decreased the retained earnings balance during the period. Both statements show the increase in Retained Earnings that occurs when dividends are declared Public companies report a more comprehensive version of the statement of retained earnings called the statement of stockholders' equity to show the causes of changes in all stockholders' equity accounts. The statement of stockholders' equity has a column for each stockholders' equity account and shows the increases and decreases in each account balance during the period.

Answer 1

Answer: A statement of retained earnings shows how net income increased and dividends decreased the retained earnings balance during the period

Explanation:

A Statement of Retained Earnings which is also known as a Statement of Equity is a financial statement that reconciles the beginning and ending Retained Earnings balance

It uses information such as net income and dividends paid out.

When net income comes in, Retained Earnings increases. When Dividends are paid out, it reduces the balance because it represents cash outflow.