Question

The balance in retained earnings prior to the closing process equals:

Multiple Choice

• the balance at the end of the previous accounting period.

• beginning retained earnings plus the current period's net income.

• beginning retained earnings plus the current period's net income minus the current period's dividends declared.

• the cash balance on the balance sheet.

Answer 1

Answer:

the balance at the end of the previous accounting period.

Explanation:

The balance in retained earnings prior to the closing process equals to the balance at the end of the previous accounting period,

because After passing closing entries net income or losses to be transferred in retained earnings Account.

Closing entries of expense:

Income Summary Debited and all expense credited

Closing entries of Income:

Income Summary credited and all income Debited

After passing such above entries Difference income or loss Transferred to Retained Earning Account and then Retained earning account added or loss by net income and loss and less dividend.

so we can say the balance in retained earnings prior to the closing process equals to the balance at the end of the previous accounting period.