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This is because net assets are either contributed in the form of cash or other assets by investors, or earned by the company net profits or net losses are rolled into the retained earnings account when closing entries are made at the end of the accounting cycle. Retained earnings are calculated by starting with the previous accounting period's retained earnings balance, adding the net income or loss, and subtracting dividends paid to shareholders. Accumulated surplus at the beginning of the financial year. Only revenue, expense, and dividend accounts are closed—not asset, liability, common stock, or retained earnings accounts.
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