I was working on the Trial Balance sheet:

1. I was wondering if Accumulated depreciation should be added to credit account or debit in both trial balance and close trial balance. It is actually part of assets (depreciated from equipment/fixed assets).

2. I am also slightly confused about the retained earning statements. I do get the answer and have put together the statement. But I do not understand the purpose behind the accounts/calculations that take place in that statement. It is very confusing concept for me. I have done the reading also and it is still confusing why we calculate what we are calculating in that statement.

For example:

Why do we do the following and in which order :

• Beginning Retained earning=? 221700 ( how do we calculate this?)
• Plus net Income 65275
• =?? (What is this amount called)286975

• Why do we minus dividend from the above?? 19100 (given value)
• And get ending retained earnings= 267875 (calculated in balance sheet)

• Why do we initially calculate Income minus dividend paid=65275-19100=46175
• Beginning retained earnings=Retained earning - 46175
• Why do we need to plug this number i.e. 46175 above?

I do get the answers but I really wish to understand it completely so that I know the concept behind and why one step is done before the other .for example: why net income is added before dividends are subtracted . I am so sorry for asking such confusing questions. The retained earnings does confuse me a lot even though I know what I need to do to calculate it.

BRE +Net Income-Dividend= end retained earnings ( I use this as well to calculate beginning retained earning but again, concept is confusing)

I would appreciate if you could please help me with this concept,
Thanks a lot in advance,
Jia

1. Accumulated Amortization/Depreciation is a contra asset account. So while normal assets have a debit balance, this will have a credit balance.

Sid Alvarez, another accounting student in your class, is very confused about retained earnings. He cannot understand why it is not the same as cash. He makes comments such as “Isn't retained earnings like a bank account that you can withdraw from?� and “After all, isn't it true that if there are no retained earnings, there are no dividends?� Give an answer to address Sid's confusion. Support your answer with at least one accounting concept. What is a concept.