The Retained Earnings account is a stockholders' equity account that normally has a credit balance. The Retained Earnings account has three components-revenues, expenses, and dividends. The difference between revenues (increased by credits) and expenses (increased by debits) equals net income. Net income increases the balance of Retained Earnings. Dividends (increased by debits) decrease the balance of Retained Earnings. Knowledge Check 01 Indicate how to increase and decrease each account listed below by selecting debit or credit Increase Debit Decrease Credit Account Accounts Receivable Equipment Salaries Payable Deferred Revenue Common Stock Debit Credit Credit