Retained Earnings

Accounting Dictionary

Retained Earnings

Retained earnings are the profits of the business which are kept in the business rather than being dispersed to the owners.

Let’s say a company earns $40,000. The owners take $15,000 of the profits for themselves. They use $25,000 to buy a new panel van for the business. The $25,000 they used to buy the panel van is called retained earnings. Retained earnings means kept profits. They retained or kept $25,000 of the earnings or profits in the business to help it grow. Retained earnings are part of stockholders’ equity.

Sign Up to Learn More!

Join our mailing list today to get notified of new discount offers, course updates, Roger CPA Review news, and more!