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Retained earnings is equity that is generated internally by corporate business transactions. yes or no, and...

Retained earnings is equity that is generated internally by corporate business transactions.

yes or no, and why?

Business   Accounting   
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Answer #1

Retained earnings implies the earnings after tax and after distribution of dividends, which are available to equity shareholders.

Earnings are the income generated by the company through business transactions. Since the retained earnings are not earned by the company through the issue of shares to outsiders but is generated through business transactions, we can say that they are generated internally by corporate business transactions.

As these retained earnings are available to the equity shareholders, the value of equity increases and hence we can say that retained earnings are a part of equity.

Putting all together, the statement "Retained Earnings is Equity that is generated internally by corporate business transactions" is correct.

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