Ending retained earnings equals beginning retained earnings plus net income minus dividends.

Ending retained earnings equals beginning retained earnings plus net income minus dividends.

• A. Beginning Retained Earnings plus Net Income minus Dividends
• B. Beginning Retained Earnings minus Net Income plus Dividends
• C. Beginning Retained Earnings plus Dividends minus Net Income
• D. Beginning Retained Earnings plus Net Income plus Dividends

Answer: (A)

Ending retained earnings shows how much of the accumulated profits the company keeps after distributing dividends. You start with the beginning balance, add the net income for the period (which increases retained earnings), and subtract any dividends paid (which reduce retained earnings). That makes Beginning Retained Earnings + Net Income - Dividends the correct expression. For example, with beginning retained earnings of 100, net income of 40, and dividends of 10, ending retained earnings would be 130. The other options mix up the signs, either reducing retained earnings by net income or increasing it by dividends, which doesn’t reflect how profits kept in the business and distributions to shareholders actually affect the balance.

Ending retained earnings shows how much of the accumulated profits the company keeps after distributing dividends. You start with the beginning balance, add the net income for the period (which increases retained earnings), and subtract any dividends paid (which reduce retained earnings). That makes Beginning Retained Earnings + Net Income - Dividends the correct expression. For example, with beginning retained earnings of 100, net income of 40, and dividends of 10, ending retained earnings would be 130. The other options mix up the signs, either reducing retained earnings by net income or increasing it by dividends, which doesn’t reflect how profits kept in the business and distributions to shareholders actually affect the balance.