Retained Earnings

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Financial Accounting
Liang Chen

Retained Earnings ¾ Retained earnings comprise the cumulative total since incorporation of net income (less losses) less any declared dividends. The balance in retained earnings is part of 9K08K,70K4O/078¶.O,L2439K0949,O,88098419K0.47547,9L43,9/4083499K4:JK represent a claim on any specific asset. A debit balance in the retained earnings is identified as a deficit. Retained Earnings Restrictions ¾ These are a portion of the balance unavailable for dividends. Restrictions generally are of one or more of the following types: Contractual restrictions (long-term debt) and Voluntary restrictions (the board of directors may voluntarily create restrictions). Retained earnings restrictions are generally disclosed in the notes to the financial statements. Prior Period Adjustments ¾ A prior period adjustment occurs when correcting an error related to a prior period, and when changing an accounting principle. When a correction of an error or a change in accounting principle results, the accounting principle treatment is similar: the cor
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