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What makes up retained earnings?

Asked Feb 9, 2009, 06:46 PM — 2 Answers
What makes up retained earnings? Is undepreciated equipment in it? Thank you for any help.

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hoightoider's Avatar
hoightoider Posts: 41, Reputation: 17
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Feb 9, 2009, 07:56 PM
Un-depreciated equipment will be reflected in net worth until it is fully depreciated. Every year the equipment will have less asset value due to the entries made for its depreciation. As the equipment is depreciated, it will reduce net income accordingly.
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codyman144 Posts: 543, Reputation: 170
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Feb 10, 2009, 10:49 AM
Quote:
Originally Posted by RoseW View Post
What makes up retained earnings? Is undepreciated equipment in it? Thank you for any help.
Retained earnings is equal to the sum of all the prior periods net income less the sum of all the dividends ever paid. If it were the end of your first year and you paid no dividends, after you closed the books retained earnings would equal net income.

No retained earnings has nothing to do with un-depreciated equipment (which is an odd term to use I will call it net fixed assets). Net Fixed assets would equal fixed assets (at cost) less accumulated depreciation and would appear in the assets section of the balance sheet. Retained earnings is in the equity section of the balance sheet completely separate from the assets section.

Are you studying for homework or a test, or did you just want to learn some accounting?
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