retained earnings
American Heritage Dictionary:
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re·tained earnings
(rĭ-tānd') 
pl.n.
The accumulated net income retained for reinvestment in a business, rather than being paid out in dividends to stockholders.
pl.n.
The accumulated net income retained for reinvestment in a business, rather than being paid out in dividends to stockholders.
Barron's Finance & Investment Dictionary:
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retained earnings
net profits kept to accumulate in a business after dividends are paid. Also called undistributed profits or earned surplus. Retained earnings are distinguished from contributed capital— capital received in exchange for stock, which is reflected in capital stock or capital surplus and donated stock or donated surplus. stock dividends—the distribution of additional shares of capital stock with no cash payment—reduce retained earnings and increase capital stock. Retained earnings plus the total of all the capital accounts represent the net worth of a firm.
See also accumulated profits tax; Paid-in Capital.
See also accumulated profits tax; Paid-in Capital.
| Retail Price, Retail Investor | |
| Retained Earnings Statement, Retention |
Investopedia Financial Dictionary:
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Retained Earnings
The percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders' equity on the balance sheet.
The formula calculates retained earnings by adding net income to (or subtracting any net losses from) beginning retained earnings and subtracting any dividends paid to shareholders:
Also known as the "retention ratio" or "retained surplus".
Investopedia Says:
In most cases, companies retain their earnings in order to invest them into areas where the company can create growth opportunities, such as buying new machinery or spending the money on more research and development.
Should a net loss be greater than beginning retained earnings, retained earnings can become negative, creating a deficit.
The retained earnings general ledger account is adjusted every time a journal entry is made to an income or expense account.
Related Links:
A company's retained earnings matter. Be investment-savvy and learn how to analyze this often overlooked information. Evaluating Retained Earnings: What Gets Kept Counts
Learn about the components of the statement of financial position and how they relate to each other. Reading The Balance Sheet
Discover the issues that complicate these payouts for investors. Dividend Facts You May Not Know
Which transactions affect the retained earnings statement?
Random House Word Menu:
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categories related to 'retained earnings'
- Accounting - retained earnings: corporate earnings not paid out as stockholders’ dividends
Wikipedia on Answers.com:
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Retained earnings
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| Accountancy | |
|---|---|
| Key concepts | |
| Accountant · Accounting period · Bookkeeping · Cash and accrual basis · Cash flow forecasting · Chart of accounts · Journal · Special journals · Constant item purchasing power accounting · Cost of goods sold · Credit terms · Debits and credits · Double-entry system · Mark-to-market accounting · FIFO and LIFO · GAAP / IFRS · General ledger · Goodwill · Historical cost · Matching principle · Revenue recognition · Trial balance | |
| Fields of accounting | |
| Cost · Financial · Forensic · Fund · Management · Tax (U.S.) | |
| Financial statements | |
| Satement of Financial Position · Cash flow statement · Statement of retained earnings · Income statement · Notes · Management discussion and analysis · XBRL | |
| Auditing | |
| Auditor's report · Financial audit · GAAS / ISA · Internal audit · Sarbanes–Oxley Act | |
| Accounting qualifications | |
| CA · CPA · CCA · CGA · CMA · CAT · CIIA · IIA · CTP | |
In accounting, retained earnings refers to the portion of net income which is retained by the corporation rather than distributed to its owners as dividends. Similarly, if the corporation takes a loss, then that loss is retained and called variously retained losses, accumulated losses or accumulated deficit. Retained earnings and losses are cumulative from year to year with losses offsetting earnings.
Retained earnings are reported in the shareholders' equity section of the balance sheet. Companies with net accumulated losses may refer to negative shareholders' equity as a shareholders' deficit. A complete report of the retained earnings or retained losses is presented in the Statement of Retained Earnings or Statement of Retained Losses.
Stockholders' equity
When total assets are greater than total liabilities, stockholders have a positive equity (positive book value). Conversely, when total liabilities are greater than total assets, stockholders have a negative stockholders' equity (negative book value) — also sometimes called stockholders' deficit. A stockholders' deficit does not mean that stockholders owe money to the corporation as they own only its net assets and are not accountable for its liabilities, though it is one of the definitions of insolvency. It means that the value of the assets of the company must rise above its liabilities before the stockholders hold positive equity value in the company!
Dividends
The decision of whether a firm should retain net income or have it paid out as dividends depends on several factors including, but not limited to the:
- Tax treatment of dividends; and
- Funds required for reinvestment in the corporation (called retention).
See also
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American Heritage Dictionary
The American Heritage® Dictionary of the English Language, Fourth Edition Copyright © 2007, 2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company. All rights reserved.
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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Investopedia Financial Dictionary
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Mentioned in
Unappropriated Retained Earnings
(in accounting)
Retained Earnings Statement
(in accounting)
Restricted Surplus
(business term)
Retained Earnings, Appropriated
(business term)
Deficit
(in accounting)
» More