m retained earningsi or the fact that

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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### Understanding Retained Earnings: Equation and Explanation

The equation **"Ending balance in retained earnings = Beginning balance in retained earnings + Net operating income – Dividends"** highlights the connection between the balance sheet and the income statement. This formula recognizes the fact that net operating income is essentially embedded within retained earnings on the balance sheet.

#### True or False

Choose the correct option to verify your understanding of the retained earnings equation:
- **True**
- **False**
Transcribed Image Text:### Understanding Retained Earnings: Equation and Explanation The equation **"Ending balance in retained earnings = Beginning balance in retained earnings + Net operating income – Dividends"** highlights the connection between the balance sheet and the income statement. This formula recognizes the fact that net operating income is essentially embedded within retained earnings on the balance sheet. #### True or False Choose the correct option to verify your understanding of the retained earnings equation: - **True** - **False**
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