Unappropriated retained earnings consist of any portion of a company's retained earnings that are not classified as appropriated retained earnings. Appropriated retained earnings are set aside by the board and are assigned to a specific purpose, such as factory construction, hiring new labour, buying new equipment, or marketing. They will not be distributed to shareholders as dividend payments. Unappropriated retained earnings can be passed on to shareholders in the form of dividend payments.
Unappropriated retained earnings help to determine the number of dividends that will be paid to shareholders. They are not directed towards a specific purpose by the board so are available to be paid out as dividends. The greater the unappropriated retained earnings, the higher the dividend that can possibly be paid. Unappropriated retained earnings are divided among all of the outstanding shares of the company and paid as dividends according to a predetermined dividend payment schedule.

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