Retained earnings will change over time because of several factors. Which of the following factors would explain an increase in retained earnings?

B. Net Income is the answer.

b. Net Income

evenue Means total Income Generated by a Business through Business Operation Main Source will be Sales. Retined Earning is Undistributed Profit which is Kept in Business itself and added along with the Capital with the aim of strengthening the Financial revenue Means total Income Generated by a Business through Business Operation Main Source will be Sales. Retained Earning is Undistributed Profit which is Kept in Business itself and added along with the Capital with the aim of strengthening the Financial Position of the company. ‎

Net income may be used to increase retained earnings.

Net income is added to retained earning hence it changes retained earnings.

Amount generated from sales in a business is called:

Net income............................

The formula calculates retained earnings by adding net income to (or subtracting net losses from) beginning retained earnings and subtracting any dividends paid to shareholders. Hence, net income increase retained earnings.

net income

d) Investment by stockholder

Retained earnings is nothing but an accummulated wealth/ income kept aside by the business entity for future use. So the factor (as listed in the question) that increases the income of the business that would be the correct answer.

a. Net Loss = It reduces the income already earned by the business in previous years. Hence, a wrong answer.

b. Net Income = It adds up to the income already earned by the business in previous year. Hence, a correct answer.

c. Dividends = It again reduces the accumulated income of the business. Hence, a wrong answer.

d. Investments by stock holders = Nothing to do with income since its a liability for the business (i.e. share capital). Hence, a wrong answer.