Which Statement Best Describes the Retained Earnings Account

question 4

Multiple Choice

Which statement best describes the retained earnings account?

• A) The retained earnings account is equal to the cash account less dividends paid.
• B) Retained earnings are funds a company has chosen to reinvest in the operations of a business rather than pay out to stockholders in dividends.
• C) Retained earnings represent unused cash of the firm.
• D) The retained earnings account is the measurement of all distributed earnings.

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Definitions:

Current Tax Assets

Assets on the balance sheet representing taxes that are recoverable in the short term because taxes were paid in advance or too much tax was paid compared to the tax liability.

Tax Consolidation

A tax regime allowing corporate groups to be treated as a single entity for income tax purposes, facilitating tax planning and compliance.

Tax Liabilities

Obligations to pay taxes to government authorities as required by law, stemming from earning income or engaging in other taxable activities.

AASB3

An Australian Accounting Standard (AASB 3) that specifies the accounting requirements for business combinations, including how to account for goodwill and acquired identifiable assets and liabilities.