The statement of retained earnings is a financial statement that records the changes and transformations that occur in retained earnings of a business over a certain accounting period. The beginning of the statement is done with the balance of the retained earnings that is retained with the business. The balance adds or subtracts certain items of the business such as profit or declared dividend etc. The statement ends with the ending balance of retained earnings that is left with the business after adding or subtracting all the required items. The general formula or representation of retained earnings is shown as under:-
Retained Earnings Formula
Beginning Retained Earnings = Net Income – Dividends = Ending Retained Earnings
In most of the cases the statement of retained earnings is treated as a separate financial statement however in some cases it can be appended at the bottom of some other financial statement such as balance sheet or income statement.
An example of the statement of retained earnings can be shown as follows that how the retained earnings are shown and presented in the form of a statement.
ABC Manufacturing Company
Statement of Retained Earnings
Retained Earnings at December 31, 2012 $150,000
Net Income of the year ended December 31, 2013 $40,000
Dividend paid to shareholder $ 25,000
Retained Earnings $165,000
The statement of retained earnings is mostly used when the retained earnings has to be shown to the outside entities such as equity holders, third party credit companies and other financial institutions.
Other Related Accounting Articles: