The accumulated net income that has been retained for reinvestment in the business rather than being paid out in dividends to stockholders. Net income that is retained in the business can be used to acquire additional income-earning assets, which result in increased income in future years. Retained earnings is a part of the owners' equity section of a firm's balance sheet. Also called earned surplus, surplus, undistributed profits. See also accumulated earnings tax, appropriated retained earnings, restricted retained earnings, statement of retained earnings.