The retained earnings formula is the cumulative net earnings since a firm began operations less all owner withdrawals or dividend payments. What is retained earnings? Negative retained earnings can be an indicator of bankruptcy, since it implies a long-term series of losses. Retained earnings is the corporation's past earnings that have not been distributed as dividends to its stockholders.. Are Retained Earnings an Asset? Are retained earnings an asset? How to make Journal Entries for Retained Earnings The retained earnings figure lies in the Share Capital section of the balance sheet. Retained earnings (also known as accumulated earnings) is a component of shareholders equity which represents the amount of net income left-over with the company since its incorporation after periodic distribution to shareholders in the form of dividends. Definition of Retained Earnings. To calculate Retained Earnings, the beginning Retained Earnings balance is added to the net income or loss and then dividend payouts are subtracted. In rare cases, it can also indicate that a business was able to borrow funds and then distribute these funds to stockholders as dividends; however, this action is usually prohibited by a lender's loan covenants . Retained Earnings are listed on a balance sheet under the shareholder’s equity section at the end of each accounting period. Consolidated retained earnings is a component of shareholders equity on a consolidated balance sheet which represents the accumulated earnings that accrue to the parent. The formula for Retained Earnings posted on a balance sheet is: Usually, retained earnings consists of a corporation's earnings since the corporation was formed minus the amount that was distributed to the stockholders as dividends.In other words, retained earnings is the amount of earnings that the stockholders are leaving in the corporation to be reinvested. Retained earnings is the cumulative amount of earnings since the corporation was formed minus the cumulative amount of dividends that were declared. The retained earnings the company keeps to reinvest equal $2 million. Definition of Retained Earnings. It equals the parent’s retained earnings purely from its own operations plus parent’s share in the subsidiary's net income since acquisition. Suppose a company has $3 million in net earnings and pays out $1 million in dividends for a year. Retained earnings appear on a company's balance sheet and may also be published as a separate financial statement. The retained earnings figure shows the collected profits of past and current periods that are distributable to the stockholders of a corporation; the amount presented through retained earnings originates from the corporation’s income statements …