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In accounting, 'retained earnings' refers to the portion of net income which is retained by the corporation rather than distributed to its owners. Similarly, if the corporation makes a loss, then that loss is retained. Retained earnings are cumulative from year to year.
Retained earnings are reported in the Shareholders' equity section of the balance sheet. A complete report of the retained earnings or retained losses is presented in the Statement of retained earnings or Statement of retained losses.
When assets are greater than liabilities, you have a positive equity. When liabilities are greater than assets, you have a negative stockholders' equity—also sometimes called stockholders' deficit. Stockholders' deficit does not mean 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 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.

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See also

See also

★ Ownership equity

★ Stockholder

★ Statement of retained earnings