Question

If retained earnings decreased during the year, and no dividends were paid, which of the following statements must be true? (A) Expenses for the year exceeded revenues.(B) The company did not have enough cash to pay its expenses.(C) Total equity decreased.(D) Liabilities increased during the year.

Answer 1

Answer:

The answer is (A) Expenses for the year exceeded revenues.

Explanation:

If retained earnings decreased during the year, and no dividends were paid this would mean the company would have made a loss in the financial period.  A loss occurs when expenses  for the year exceed revenues.