If the Retained Earnings Account Decreases from the Beginning of the Year

question 96

Multiple Choice

If the retained earnings account decreases from the beginning of the year to the end of the year, then

• A)net income is less than dividends.
• B)there was a net income and no dividends.
• C)additional investments are less than net losses.
• D)net income is greater than dividends.

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Definitions:

Interest Expense

Interest expense is the cost incurred by an entity for borrowed funds, typically presented as a line item on the income statement.

Fixed Expense

Fixed expense refers to costs that do not fluctuate with the level of goods or services produced by the business, such as rent, salaries, and insurance.

Borrowing Risk

The potential danger that borrowers might not be able to repay their loans or meet other financial obligations, leading to financial loss for the lender.

Accrued Interest

Interest that has been incurred but not yet paid at the end of a period.