net income increases the retained earnings of a corporation as shown on the statement of stockholders equity

Answer 1

Yes, that statement is correct. Net income is the amount of profit that a corporation earns. It represents the revenue earned minus the expenses incurred during a specific period of time.

Retained earnings, on the other hand, represent the accumulated profits of a corporation that have been retained within the business instead of being distributed to shareholders as dividends.

When a corporation earns a net income, it increases its retained earnings on the statement of stockholders' equity. This is because net income is added to the beginning balance of retained earnings, resulting in a higher ending balance.