The firm need not change the title of the general ledger account even though it contains a debit balance. The most common credits and debits made to Retained ...SkiptomaincontentFinancialAccountingUnit14:Stockholders’Equity,EarningsandDividendsSearchfor:RetainedEarnings:EntriesandStatementsRetainedearningsTheretainedearningsportionofstockholders’equitytypicallyresultsfromaccumulatedearnings,reducedbynetlossesanddividends.Likepaid-incapital,retainedearningsisasourceofassetsreceivedbyacorporation.Paid-incapitalistheactualinvestmentbythestockholders;retainedearningsistheinvestmentbythestockholdersthroughearningsnotyetwithdrawn.Thebalanceinthecorporation’sRetainedEarningsaccountisthecorporation’snetincome,lessnetlosses,fromthedatethecorporationbegantothepresent,lessthesumofdividendspaidduringthisperiod.NetincomeincreasesRetainedEarnings,whilenetlossesanddividendsdecreaseRetainedEarningsinanygivenyear.Thus,thebalanceinRetainedEarningsrepresentsthecorporation’saccumulatednetincomenotdistributedtostockholders.WhentheRetainedEarningsaccounthasadebitbalance,adeficitexists.Acompanyindicatesadeficitbylistingretainedearningswithanegativeamountinthestockholders’equitysectionofthebalancesheet.Thefirmneednotchangethetitleofthegeneralledgeraccounteventhoughitcontainsadebitbalance.ThemostcommoncreditsanddebitsmadetoRetainedEarningsareforincome(orlosses)anddividends.Occasionally,accountantsmakeotherentriestotheRetainedEarningsaccount.RetainedearningsappropriationsTheamountofretainedearningsthatacorporationmaypayascashdividendsmaybelessthantotalretainedearningsforseveralcontractualorvoluntaryreasons.Thesecontractualorvoluntaryrestrictionsorlimitationsonretainedearningsareretainedearningsappropriations.Forexample,aloancontractmaystatethatpartofacorporation’s $100,000ofretainedearningsisnotavailableforcashdividendsuntiltheloanispaid.Oraboardofdirectorsmaydecidetouseassetsresultingfromnetincomeforplantexpansionratherthanforcashdividends.AnexampleofavoluntaryrestrictionwasGeneralElectric’