Retained Earnings

Business, Legal & Accounting Glossary

Definition: Retained Earnings

Quick Summary of Retained Earnings

Accumulated past profits, not distributed in dividends, available to finance investment in assets.

What is the dictionary definition of Retained Earnings?

Dictionary Definition

In accounting, retained earnings are profits that were not paid to a company’s shareholders as dividends.

They are reported in the ownership equity section of a firm’s balance sheet. The decision of whether a firm should retain profits or disburse them as dividends depends on at least two things: the firm’s judgement of its own investment opportunities relative to those available in the market and any difference in tax treatment of dividends paid now and capital gains expected to result from investing retained earnings.

Full Definition of Retained Earnings

Retained earnings are accumulated earnings that have not been distributed to shareholders but rather reinvested in the business. Put simply, the net income a company earns, less the dividends it pays, is the net addition to retained earnings for the accounting period. A company’s retained earnings are disclosed at or near the bottom of the shareholder’s equity section of the balance sheet. Accountants may prepare a separate “statement of retained earnings” that shows the change in retained earnings during the accounting period; however, the statement of retained earnings is often combined with the income statement. Retained earnings may be appropriated for specific purposes (like bond payments) or unappropriated; only unappropriated retained earnings are available to be distributed as dividends. An appropriation of retained earnings may be disclosed on the balance sheet or in the footnotes to the financial statements. Note, however, that an appropriation of retained earnings does not imply that the amount is held and segregated as cash.

Synonyms For Retained Earnings

carried-forward, capital reserves, carried-over, undistributed profits, retained profits

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Retained Earnings. Payroll & Accounting Heaven Ltd. April 21, 2021
Chicago Manual of Style (CMS):
Retained Earnings. Payroll & Accounting Heaven Ltd. (accessed: April 21, 2021).
American Psychological Association (APA):
Retained Earnings. Retrieved April 21, 2021, from website:

Definition Sources

Definitions for Retained Earnings are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 13th February, 2020 | 2 Views.