Answer
Kathleen is wrong. Retained earnings is not an asset itself but a source of assets. Even if the retained earnings are reinvested in the entity, it is not listed as an asset but as a portion of stockholders’ equity because it is a form of reinvestment that in effect increases the ownership interest of the business entity.
Work Step by Step
For instance, money from a note payable, though invested in the entity, is not listed as an asset but as a liability that the company has to meet later. Similarly, retained earnings is not an asset.
