Capital resulting from the retention of earnings should be entered in an account with an appropriate title such as

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Retained Earnings is the appropriate title for the account that represents the capital resulting from the retention of earnings. This account keeps track of the company's profits that are not distributed as dividends to its shareholders but are kept in the business to be reinvested or used for other purposes such as debt reduction or acquisition of assets. Appropriated Retained Earnings is also a possible option if the company designates a portion of its retained earnings for a specific purpose or project. However, it is not a general title for the account and is only used in specific circumstances. Earnings Retained in the Business and Capital Stock are not appropriate titles for this account since they do not accurately reflect the nature of the capital resulting from the retention of earnings.

Capital Resulting from the Retention of Earnings Should Be Entered