Retained earning is the difference between the net profit minus dividend distributed. That is, from the earnings, a portion is distributed as dividend and the balance is retained for future needs of the company. this is called retained earnings. Suppose till last year, retained earnings is Rs.100 Lakhs, this year Net profit is 30 lakhs and 10 lakhs is the dividend distributed, then current retained earnings will be Rs.120 Lakhs (100+30-10). Thus over a period, the retained earnings will go up. This will form part of Reserves and Surplus.