Davis Company was started on January 1, 2012. During the month of January, Davis earned $4,600 of

Question:

Davis Company was started on January 1, 2012. During the month of January, Davis earned $4,600 of revenue and incurred $3,000 of expense. Davis closes its books on December 31 of each year.

Required
a. Determine the balance in the Retained Earnings account as of January 31, 2012.
b. Comment on whether retained earnings is an element of or an account.
c. What happens to the Retained Earnings account at the time expenses are recognized?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...