The retained earnings account on the balance sheet does not represent cash.Rather,it represents part of the stockholders' claims against the firm's existing assets.Put another way retained earnings are stockholders' reinvested earnings.

Question

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Retained earnings are not cash, they represent the portion of a company's profits that have been kept as reserves and reinvested in the business, thereby increasing the stockholders' equity in the company.

The Retained Earnings Account on the Balance Sheet Does Not