why retained earning is considered as a permanent source of funds
Answers
Answer:
retained earning is a surplus profit after paying all the liabilities of creditors which a company retained for fullfiling its future financial needs in future . it is the asset of company. so it is a permanet source of funds for a company
Answer:
The retained earnings of a corporation is the accumulated net income of the corporation that is retained by the corporation at a particular point of time, such as at the end of the reporting period. At the end of that period, the net income (or net loss) at that point is transferred from the Profit and Loss Account to the retained earnings account. If the balance of the retained earnings account is negative it may be called accumulated losses, retained losses or accumulated deficit, or similar terminology.
Any part of a credit balance in the account can be capitalised, by the issue of bonus shares, and the balance is available for distribution of dividends to shareholders, and the residue is carried forward into the next period. Dividends can only be paid out of the positive balance of the retained earnings account at the time that payment is to be made.