BF2S Forums Need Accounting help

Investopedia explains Retained Earnings wrote:

In most cases, companies retain their earnings in order to invest them into areas where the company can create growth opportunities, such as buying new machinery or spending the money on more research and development.

Should a net loss be greater than beginning retained earnings, retained earnings can become negative, creating a deficit.

The retained earnings general ledger account is adjusted every time a journal entry is made to an income or expense account.

http://www.investopedia.com/terms/r/ret … rnings.asp

Equity is the owner's total investment in the company.

There are divisions of within equity.

Retained earnings is one of them, representing the previous years accumulation of income (aka Revenues less Expenses), less distributions of dividends, and valuation adjustments (aka prior period adjustments, valuation adjustments on capital assets, etc).  It's used for keeping track of the accumulation of income after the original issuance.  Total equity = capital stock + APIC + Retained earnings (unless you want to get fancy)

The other most common types of equity are:
Stock (de minus dollar amounts representing the legal documents of who owes the shares)
Additional paid in capital (additional contributions above the dollar amount when the company forms, or contributions afterwards)
There's more types as well...

I'm a CPA btw.  Thanks for not asking for the complex version.