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chapter 14 retained earnings

chapter 14 retained earnings

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Expert Solution

Retained earnings are the accumulated profits of the company it has earned till date,less dividends and other distributions made to investors.

Retained earnings is adjusted whenever an entry is made in accounting records that impacts revenue or expense account

formula for retained earnings is

Beginning retained earnings+profits/(loss) - Dividends and other

If retained earnings are large then it implies that the company is financially healthy.

Retained earnings will have both positive and negitive balance,negitive balance will exist if the company incurrs losses for longer period of time or it has distributed dividends more than it had in retained earnings

Retained earnings balance is reported under the share holder's equity section of company's balance sheet

Retained earnings can be evaluated by using the following three factors

Age of the company i.e when the company has started,older companies will have more retained earnings

dividend policcy and profitability of the company

A growing company should use their retained earnings for development of there business instead of paying dividends

this is the information related to Retained earnings

ekkarill92 answered 2 years ago
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