Retained Earnings is an alias of
A. Indirect Income
B. Reserve and Surplus
C. Capital Account
The Correct Answer Is:
- B. Reserve and Surplus
Retained Earnings is an alias of Reserve and Surplus. A company’s retained earnings are aliases for its reserves, which are excess profits that have not yet been reported as income on its balance sheet. Instead of referring to these assets as surplus, retained earnings are used to refer to them as assets. Retained earnings refer to excess profits not yet reported as income on the balance sheet of a company in the context of financial reporting.
There is a common confusion between this usage and the concepts of reserve and surplus, which are different ways of referring to the same thing. In business, a reserve represents how much money a company has available after subtracting any necessary expenditures.The surplus of a business is the amount of money it created without factoring in the cost of running the business. It is the former rather than the latter that are considered retained earnings.