Retained earnings, also known as accumulated earnings or retained profits, refer to the portion of a company's net income that is not distributed to shareholders as dividends but is instead retained and reinvested in the business. It represents the cumulative amount of earnings that a company has kept or retained since its inception, minus any dividends or distributions made to shareholders.
Retained earnings are reported on the balance sheet under the shareholders' equity section. They are considered a part of the company's equity capital and contribute to its overall net worth. Retained earnings increase when a company generates profits and decreases when dividends are paid out to shareholders or when the company incurs losses.
The primary purpose of retaining earnings is to provide a source of capital for the company's growth, expansion, and investment activities. By reinvesting profits into the business, a company can fund research and development, acquire new assets, pay off debt, or pursue other strategic initiatives. Retained earnings also enhance the financial stability of a company and may be used as a cushion during periods of economic downturn or unforeseen expenses.
It's worth noting that retained earnings are subject to certain legal and regulatory restrictions. Companies may need to comply with local laws and regulations, as well as adhere to any shareholder agreements or corporate governance guidelines, which could dictate the maximum amount of earnings that can be retained or the requirements for distributing dividends to shareholders.
Wimax Company limited
Retained earning calculation....
Year-2022 Year-2021
Opening balance xxxx xxxx
Add: profit(Loss) during the year xxxx xxxx
Adjustment of Tax provision for the (AY 2020-2021 ) (xxxx ) (xxxx)
Less: Cash Dividend xxxx xxxx
Less: Stock Dividend xxxx xxxx
Total Retaining earning xxxx xxxx