Retained earnings represent the portion of a corporation's profits that have been kept within the company rather than paid out as dividends. As such, they are not an asset, do not represent contributed capital, and are not investments made by shareholders. Rather, they represent capital earned through profitable operations.

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Retained Earnings

Question 27

Multiple Choice

Retained earnings:

A) is classified as an asset on the corporate balance sheet
B) is part of contributed capital
C) represents investments by the shareholders of the corporation
D) represents capital earned by profitable operations

Correct Answer: