Before Closing Entries Are Prepared, the Retained Earnings Balance in the Adjusted

question 76

Multiple Choice

Before closing entries are prepared, the retained earnings balance in the adjusted trial balance is equal to:

• A) the balance of retained earnings at the beginning of the year.
• B) the balance of retained earnings after adding revenues and subtracting expenses but before subtracting dividends.
• C) the balance of retained earnings at the end of the year.
• D) the balance of retained earnings at the beginning of the next year.

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Definitions:

Static Planning Budget

A budget designed for a single level of activity and does not change even if the level of activity changes.

Fixed Costs

Expenses that remain constant for a company irrespective of the level of production or sales.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, providing a more relevant comparison of actual to budgeted performance.

Total Variable Cost

The sum of all variable costs (costs that change with production volume) involved in producing a specific level of output.