Retained earnings are the cumulative net profits or losses minus dividends paid since the date of incorporation and are part of shareholders' equity on the balance sheet. They do not represent cash available to pay shareholders and are not part of the income statement.

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Retained Earnings

Question 53

Multiple Choice

Retained earnings:

A) Represent an amount of cash available to pay shareholders.
B) Are part of the income statement.
C) Are the cumulative net profits or losses minus dividends paid since the date of incorporation.
D) Are the cumulative net profits or losses minus dividends paid since the date of incorporation, and are part of shareholders' equity.
E) All of these answers are correct.

Correct Answer: