Retained Earnings are defined as:

Retained Earnings are defined as:

• A. The total accumulated net income minus the total accumulated dividends since the company's founding.
• B. The amount of cash kept on hand at year-end.
• C. The income before taxes.
• D. The total of all owner's equity components.

Answer: (A)

Retained earnings capture the portion of a company’s profits that has been kept in the business over time, not paid out as dividends. It equals the cumulative net income after taxes minus cumulative dividends since the company began. On the balance sheet, it’s part of owners’ equity and grows when the company earns profit after tax and pays fewer or no dividends, and it shrinks when dividends exceed net income or when there are losses. It is not cash on hand, nor is it the pre-tax income, and it’s not the total of all owners’ equity components, which would include contributed capital and other equity items.

Retained earnings capture the portion of a company’s profits that has been kept in the business over time, not paid out as dividends. It equals the cumulative net income after taxes minus cumulative dividends since the company began. On the balance sheet, it’s part of owners’ equity and grows when the company earns profit after tax and pays fewer or no dividends, and it shrinks when dividends exceed net income or when there are losses. It is not cash on hand, nor is it the pre-tax income, and it’s not the total of all owners’ equity components, which would include contributed capital and other equity items.