Retained earnings
Also called: reserves and surplus, other equity, retained profits
The profits a company has kept over the years instead of paying them out as dividends, recorded as part of shareholders' equity.
Each year's net profit, less dividends, is added to retained earnings. In Indian balance sheets it usually sits within "other equity", often called reserves and surplus.
Retained earnings are not a pile of cash. The money has usually been spent on equipment, stock and other assets.
Example
A company with ₹145 lakh of net profit that pays a ₹20 lakh dividend adds ₹125 lakh to retained earnings.
Learn more in these lessons
- The balance sheetHow do you read a company's balance sheet?
- How the three statements connectHow are the three financial statements connected?
Related terms
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