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The financial statements of XCorp include income statements that detail its earnings and expenses. Accounting requirements include setting aside funds that will be needed to pay for retirement benefits. How does that requirement affect the numbers on XCorp's income statement?

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varshamittal029

Accounting requirements include setting aside funds that will be needed to pay for retirement benefits. Meeting the requirement lowers the company's reported income.

The amount set aside for retirement benefits are that amount which was earlier considered as profit. However, keeping aside that amount would decrease the profit. Hence, lowering company's reported income.

Retirement benefits- Employees' leave encashment (the ability to accumulate leaves and exchange them for cash upon retirement), retirement gratuity, and the amount they contributed to their provident fund account throughout their service are the primary retirement benefits.
Retirement benefits are benefits payable to a pension scheme member upon retirement or earlier withdrawal from service, such as retirement pensions; retirement lump sums or gratuities; and benefits payable following the member's death in retirement (such as dependents' pensions).

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