Posted: April 20th, 2022
Contributed capital represents the total investment that has been paid
Contributed capital represents the total investment that has been paid in to the company by its shareholders as a result of the purchase of stock.
Contributed capital represents the total investment that has been paid in to the company by its shareholders as a result of the purchase of stock. Earned capital represents the cumulative net income that has been earned, less the portion of that income that has been paid out to shareholders in the form of dividends. When profit is earned, shareholders have the option of paying out that profit as a dividend or reinvesting the earnings in order to grow the company. In fact, many companies title the Retained Earnings account as Reinvested Earnings. Earned capital, thus, represents an implicit investment by the shareholders in the form of forgone dividends.
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Contributed capital is the total amount of money stock in the business by its shareholders as a result of stock purchases.
Contributed capital is the total amount of money invested in the company by its shareholders as a result of stock purchases. Earned capital is the total amount of net income earned less the portion of that income paid out to shareholders in the form of dividends. When a profit is made, shareholders have the option of receiving a dividend or reinvesting the earnings to help the company grow. In fact, many businesses refer to the Retained Earnings account as the Reinvested Earnings account. As a result, earned capital represents an implicit investment by the government.