Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 1 - Introduction to Financial Statements - Questions - Page 27: 13


Retained earnings are the amount of money retained by the corporation. Net income increases the retained earnings and dividend payouts and net loss decrease the retained earnings.

Work Step by Step

Retained earnings are those earnings (profits) of the company which are not distributed to the stockholders in the form of dividends. A retained earnings statement is prepared to reflect the amount distributed to the owners and the amount retained by the corporation for future growth.
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