Why are paid-in-capital and retained earnings displayed separately in the stockholder’s equity section of the balance sheet?

Common and preferred stock | Business & Finance homework help

Paid-in capital and retained earnings are displayed separately in the stockholder’s equity section of the balance sheet because they represent different sources of funding. Paid-in capital is money that shareholders have invested into a company, while retained earnings represent profits that have been reinvested back into the business. By breaking down these two sources of funding separately, it allows investors to understand how a company is being financed as well as how much profit has been generated over time.