Retained Earnings vs Shareholders Earnings vs Owners Equity.doc I have been trying to understand the difference between retained earnings and shareholders’ equity. From what I can find is: • retained earnings is the amount (or is it a percentage) of net earnings that is retained by a company to be reinvested or to reduce liabilities, while • shareholders' equity (also known as "net worth") is: o total assets minus the total liabilities, or o the amount a company is financed though common and preferred shares Shareholders' Equity = Share Capital + Retained Earnings - Treasury Shares • owners' equity is: o total assets minus the total liabilities, or My remedial evaluation is: • Retained Earnings have to be invested or used to reduce liabilities, while • Owner's Equity does not have to be used for anything. .. it can just set there in the capital account if that is what the owner(s) want? • Shareholders’ Equity is like Owner’s equity except you have shareholders involved and you have to subtract
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This note was uploaded on 09/19/2010 for the course ACCT 220 taught by Professor Ullmann during the Fall '10 term at University of Nebraska Kearney.