Undistributed Earnings, also referred to as retained earnings, are the portion of a company's net income that is not distributed as dividends to shareholders but retained within the company for operations, expansion, or other strategic purposes. These earnings accumulate over time, forming part of the equity section on the company's balance sheet under "Retained Earnings." For example, if a company earns $1,000,000 in net income during a year and decides to distribute $300,000 as dividends, the remaining $700,000 would be added to its undistributed earnings. Such earnings may be used to finance business expansion, invest in new projects, pay off debts, or build reserves for future contingencies.

For instance, in Easy Month End, a financial close and reconciliation software, tracking and understanding undistributed earnings can be crucial for preparing accurate financial statements and ensuring compliance with financial reporting standards (FRS). Additionally, reconciling the undistributed earnings account helps verify that the retained earnings value is accurately carried forward to subsequent periods and integrated into performance metrics like earnings per share (EPS).