What is the concept of retained earnings in accounting?

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by andy , in category: Taxation and Accounting , 9 months ago

What is the concept of retained earnings in accounting?

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1 answer

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by juston , 9 months ago

@andy 

Retained earnings refer to the portion of a company's net income that is retained, rather than distributed to shareholders as dividends. They represent the accumulated profits that a company has earned over time and are typically reinvested back into the business for future growth and expansion. Retained earnings are often used to finance capital expenditures, repay debts, invest in research and development, or fund business operations. They are reported on the balance sheet under shareholders' equity and are an important measure of a company's financial health and its ability to generate and allocate profits.