Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Retained Earnings

Financial Accounting

12. Stockholders' Equity

Retained Earnings

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Multiple Choice

Which term describes profits generated from operations that have been reinvested into the business rather than distributed to shareholders?

Paid-in Capital

Dividends Payable

Retained Earnings

Accumulated Depreciation

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Verified step by step guidance

Understand the concept of Retained Earnings: Retained Earnings represent the portion of a company's profits that are reinvested into the business rather than distributed to shareholders as dividends. It is a key component of equity on the balance sheet.

Differentiate Retained Earnings from Paid-in Capital: Paid-in Capital refers to the funds raised by the company from shareholders in exchange for shares of stock, not profits generated from operations.

Differentiate Retained Earnings from Dividends Payable: Dividends Payable are liabilities representing the amount of dividends declared but not yet paid to shareholders, whereas Retained Earnings are reinvested profits.

Differentiate Retained Earnings from Accumulated Depreciation: Accumulated Depreciation is a contra-asset account that tracks the total depreciation of fixed assets over time, unrelated to profits or equity.

Conclude that Retained Earnings is the correct term: Based on the definitions and comparisons, Retained Earnings accurately describe profits reinvested into the business rather than distributed to shareholders.