Retained earnings and the closing process
Firwood Company was started on January 1, 2010. During the month of January, Firwood earned $4,600 of revenue and incurred $3,000 of expense. Firwood closes its books on December 31 of each year.
Required
a. Determine the balance in the Retained Earnings account as of January 31, 2010.
b. Comment on whether retained earnings is an element of financial statements or an account.
c. What happens to the Retained Earnings account at the time expenses are recognized