Which of the Following Statements Does Not Correctly Describe the Relationship

question 37

Multiple Choice

Which of the following statements does not correctly describe the relationship between the income statement and the ending retained earnings balance?

• A)Net income increases the ending balance of retained earnings.
• B)A net loss decreases the ending retained earnings balance.
• C)A net loss does not affect the ending retained earnings balance.
• D)Net income and net loss both affect the ending retained earnings balance.

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Definitions:

Reportable Segments

These are operational segments of a business that have distinct financial data available, and whose results are regularly reviewed by the entity’s chief operating decision maker.

Profits Test

A criterion used to evaluate the profitability of a business or investment, often assessing whether revenues exceed costs or expenses to determine financial viability.

Assets Test

A financial measure used to determine eligibility for certain government benefits based on the value of one's assets.

Profit Test

A determination to assess the viability and profitability of a project or investment by comparing costs against potential benefits.