Accumulated Earnings and Profits

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DEFINITION of 'Accumulated Earnings and Profits'

An accounting term applicable to stockholders of closely held businesses. Accumulated earnings and profits are a company's net profits after deducting distributions to the stockholders. This is calculated as of the beginning of the year.

BREAKING DOWN 'Accumulated Earnings and Profits'

Accumulated earnings and profits are similar to retained earnings, because both terms refer to the net profits of a company after shareholder distributions. However, accumulated earnings and profits also can include reserve accounts, which are not deductible and which can be included when computing taxable earnings.

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RELATED FAQS
  1. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  2. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  3. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  4. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
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