In accounting, retained earnings refers to the portion of net income from a period which is retained by the corporation, rather than distributed to its owners. Similarly, if the corporation makes a loss for the period, then that loss is retained. It has been suggested that Accounting scholarship be merged into this article or section. ... Net income is equal to the income that a firm has after subtracting costs and expenses from the total revenue. ...

They are reported in the Shareholders' equity section of the balance sheet. A complete presentation of the retained earnings or retained losses is presented in the Statement of retained earnings or Statement of retained losses. In business and accounting, the shareholders equity refers to the amount of assets that are owned by a companys shareholders. ... In formal bookkeeping and accounting, a balance sheet is a statement of the book value of all of the assets and liabilities (including equity) of a business or other organization or person at a particular date, such as the end of a fiscal year. ... Statement of retained earnings, also known as Statement of owners equity, is one of financial statements, it explains the changes in companys retained earnings over the reporting period. ...

When Assets are greater than Liabilities you have a positive Equity or stockholders' equity. When Liabilities are greater than Assets, you have a negative stockholders' equity also sometimes called stockholders' deficit. Stockholders' deficit does not entail that stockholders owe money. It just means that the value of the assets of the company will have to rise above its liabilities before the stockholders will reap any value (above zero) from owning the company's stock.

The decision of whether a firm should retain net income or have it be paid-out as dividends depends on several factors including, but not limited to the:

• tax treatment of dividends; and
• funds required for reinvestment in the corporation.

A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, tribes, secessionist movements or revolutionary movements). ...

See also

• Ownership equity
• Stockholder
• Statement of retained earnings