Which of the following would be included on a statement of retained earnings?

• A. Dividends declared during the period
• B. Net income for the period
• C. Total assets at year-end
• D. Cash flows from operating activities

Answer: (B)

Verified step by step guidance

1. Understand the purpose of the statement of retained earnings: It is a financial statement that shows the changes in retained earnings over a specific period. Retained earnings are the portion of net income that is not distributed as dividends but retained by the company for reinvestment or to pay off debt.
2. Identify the key components of the statement of retained earnings: The statement typically includes the beginning retained earnings balance, net income (or net loss) for the period, dividends declared, and the ending retained earnings balance.
3. Analyze the options provided: Determine which items are relevant to the statement of retained earnings. For example, 'Net income for the period' directly affects retained earnings as it increases the balance, while 'Dividends declared during the period' reduces retained earnings.
4. Eliminate irrelevant options: 'Total assets at year-end' and 'Cash flows from operating activities' are not part of the statement of retained earnings. These belong to the balance sheet and statement of cash flows, respectively.
5. Conclude that the correct answer is 'Net income for the period,' as it is a key component of the statement of retained earnings and directly impacts the calculation of the ending retained earnings balance.