Which of the following best describes the term "retained earnings"?
A)The amount of total profits earned by a business since it began operations
B)The amount of interest or claim that the owners have on the assets of the business
C)The future economic resources of a business entity
D)The cumulative profits earned by the business less any dividends distributed

Question

Quizplus · Accepted Answer

Retained earnings refer to the portion of a company's profits that are kept by the company instead of being paid out as dividends to shareholders. It is calculated by subtracting the cumulative dividends paid out from the cumulative profits earned by the company. Therefore, option D is the correct answer as it accurately describes retained earnings. Option A describes total profits earned, option B describes the owners' interest in assets, and option C describes future economic resources which are not directly related to retained earnings.

Which of the Following Best Describes the Term "Retained Earnings