<P> Retained earnings are reported in the shareholders' equity section of the corporation's balance sheet . Corporations with net accumulated losses may refer to negative shareholders' equity as positive shareholders' deficit . A report of the movements in retained earnings are presented along with other comprehensive income and changes in share capital in the statement of changes in equity . </P> <P> Due to the nature of double - entry accrual accounting, retained earnings do not represent surplus cash available to a company . Rather, they represent how the company has managed its profits (i.e. whether it has distributed them as dividends or reinvested them in the business). When reinvested, those retained earnings are reflected as increases to assets (which could include cash) or reductions to liabilities on the balance sheet . </P> <P> When total assets are greater than total liabilities, stockholders have a positive equity (positive book value). Conversely, when total liabilities are greater than total assets, stockholders have a negative stockholders' equity (negative book value)--also sometimes called stockholders' deficit . A stockholders' deficit does not mean that stockholders owe money to the corporation as they own only its net assets and are not accountable for its liabilities, though it is one of the definitions of insolvency . It means that the value of the assets of the company must rise above its liabilities before the stockholders hold positive equity value in the company . </P> <Dl> <Dd> Retained earnings = opening retained earnings + current year net profit from p&l a / c - dividends paid in current year </Dd> </Dl>

For retained​ earnings the category of account and its normal balance is