Retained earnings is the total amount of:
A)income that is distributed as dividends to the shareholders.
B)debt not repaid in the current year.
C)accumulated depreciation charged on the firm's assets.
D)income that has been saved and reinvested in assets since the firm started business.
E)profit retained by a firm to pay taxes.

Question

Quizplus · Accepted Answer

Retained earnings refer to the portion of a company's profits that have been saved and reinvested in the business rather than paid out as dividends. Option A is incorrect because it suggests that all income is distributed as dividends, which is not the case. Option B is incorrect because retained earnings refer to profits that have not been used to repay debt. Option C is incorrect because accumulated depreciation is not a component of retained earnings. Option E is incorrect because taxes are paid out of a company's profits, not out of retained earnings.

Retained Earnings Is the Total Amount Of