Final answer:
Retained profits are summarized in the Statement of Equity, reflecting the earnings reinvested in the business and displayed under shareholders' equity on the balance sheet.
Step-by-step explanation:
Retained profits are essentially a summary of the Statement of Equity. They represent the amount of earnings generated by a company that is reinvested in the business, rather than being distributed to shareholders as dividends. These profits are retained by the company to reinvest in its operation or to pay debt. They are found on the company's balance sheet under shareholders' equity. A balance sheet in general is a financial statement that lists a company's assets and liabilities, including cash, property, and debts owed. The balance sheet also displays the company's net worth, or equity, which includes retained profits. While the income statement shows the revenue and expenses over a certain period, and the cash flow statement shows the inflows and outflows of cash, it's the balance sheet where you will find the cumulative result of those operations, reflected in the retained profits figure.