Asked by Emanuel Holesome on May 03, 2024
Verified
The net increase or decrease in Retained Earnings for a period is recorded by closing entries.
Retained Earnings
Retained earnings are the portion of a company’s profits that is kept or retained rather than being paid out as dividends to shareholders or reinvested into the business.
Closing Entries
Entries recorded at the conclusion of an accounting cycle to shift balances from temporary to permanent accounts.
- Become familiar with the purpose of retained earnings in financial documentation and the steps for completing closing entries.
Verified Answer
RK
Roxane Keely-RaynerMay 08, 2024
Final Answer :
True
Explanation :
Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts (revenue, expense, and dividend accounts) to Retained Earnings. This includes the net income/loss for the period, which affects the balance of Retained Earnings. Therefore, the net increase or decrease in Retained Earnings for a period is recorded by closing entries.
Learning Objectives
- Become familiar with the purpose of retained earnings in financial documentation and the steps for completing closing entries.
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