CPA Accountant Review Questions

Answer -A - Retained earnings are revenue of a corporation that is not paid out in dividends. In a corporation, retained earnings are net profits minus shareholder dividends.

Key Takeaway: Retained earnings are net profits kept to accumulate in a business after dividends are paid out to the corporation’s shareholders. Retained earnings are shown within a separate category in the stockholder’s equity section of the balance sheet. As part of the equity section, the retained earnings category typically has a credit balance and increases to this account are made by crediting the account.