Difference Between Appropriated Retained Earnings And Unappropriated Retained Earnings

Appropriated Retained Earnings are those Retained Earnings that are used for some special purposes such as to grow the business, payoff debts, general reserve, etc. and these are not used to pay dividend to shareholders while Unappropriated Retained Earnings are used to pay Dividend to shareholder, to acquire assets, to grow the business, etc., and these are not be considered to use for some special purposes as decided by top level management in board meeting.

The investors and shareholders are interested in the unappropriated retained earnings rather than appropriated retained earnings as these are used to pay dividend to shareholders. In case of profits, if there is a policy to transfer more portion of retained earnings to unappropriated retained earning, then more dividend will be paid to shareholders otherwise, the appropriate retained earnings are used for special purposes to Sustain the Business in case of crisis.