Asked by Torye Smith on May 21, 2024
Verified
The balance in Retained Earnings should be interpreted as representing surplus cash left over for dividends.
Retained Earnings
Refers to the portion of net income left over for the business after it has paid out dividends to its shareholders.
Surplus Cash
Excess funds that a company has after covering all its operational expenses, investments, and financial obligations.
Dividends
Distributions to shareholders from a corporation, often sourced from the entity's earnings.
- Grasp the significance of retained earnings in the context of financial reports and the methodology of closing entries.
Verified Answer
TD
Theodore DemetriadesMay 26, 2024
Final Answer :
False
Explanation :
The balance in Retained Earnings represents the cumulative net income of a company that has been retained for future use or investments, and is not necessarily surplus cash available for dividends. The decision to pay dividends is made separately by the company's management and board of directors.
Learning Objectives
- Grasp the significance of retained earnings in the context of financial reports and the methodology of closing entries.
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