Question

Typically, the only credit to the retained earnings account for a corporation is

A. any withdrawals by the owners.
B. net loss of the period.
C. net income of the period.
D. the initial investment of stockholders.

Answer 1

C. net income of the period.

Answer 2

Answer is C. net income of the period

A is wrong because withdrawals by owners would only reduce the credit and not add anything to it.

B is also wrong since debiting the retained earnings will also decrease the equity so it will result in a net loss for the company.

Answer is C since crediting the net earning implies that the organization earned some profit which would increase the equity.

D is wrong too because the initial investment does not go to the retained earnings.