Which of the following is an example of equity?

Study for the VCE Accounting Test. Utilize flashcards and multiple choice questions with detailed explanations. Secure exam success!

Retained earnings represent the accumulated profits of a company that have not been distributed to shareholders as dividends. This portion of equity reflects the company's reinvestment of earnings into the business for growth, expansion, or other purposes. It is recorded on the balance sheet under the equity section, indicating the owners' residual interest in the company's assets after all liabilities have been settled.

Equity essentially represents the owners' claim on the assets of the business, and retained earnings specifically illustrate how much of those claims are derived from the company's profitable operations over time. This makes it a quintessential example of equity, as it embodies the financial stake that shareholders have in the company.

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