For a company,retained earnings represent:
A)contributed capital from shareholders
B)profits retained by the company before tax is paid to the government
C)net cash retained by the company before any payment for dividends to shareholders
D)profits retained by the company after payment and provision for dividends,and after any transfer to and from reserves.

Question

Quizplus · Accepted Answer

Retained earnings refer to the portion of the company's profits that are kept within the business after payment of dividends and any transfer to or from reserves. It is not contributed capital from shareholders (choice A) because it is earned by the company, not contributed by shareholders. It is also not profits retained before tax is paid (choice B) because retained earnings takes into account any payments for dividends made. Lastly, it is not net cash retained before any payment of dividends (choice C) because retained earnings consider any transfers to and from reserves, not just cash retained.

For a Company,retained Earnings Represent