What does retained earnings mean on the CPA exam?
Retained earnings. Cumulative profit the entity has kept rather than paid out as dividends. It is a balance, not a pot of cash.
Defined against ASC 505-10.
Which CPA exam sections use retained earnings?
Retained earnings appears in the FAR section of the CPA exam.
Related terms
- earnings and profits: A corporation's cumulative economic capacity to pay a distribution out of earnings rather than out of capital.
- change in accounting principle: A switch from one acceptable principle to another, allowed only when a new standard requires it or the new principle is preferable.
- treasury stock: A company's own shares reacquired and not retired.
- net income: What is left after every revenue and expense of the period, including tax and discontinued operations.
- prior period adjustment: A correction of a material error in previously issued statements.
- financial statements: The formal set an entity publishes: balance sheet, income statement, statement of cash flows, statement of changes in equity, and the notes.