Statement of Retained Earnings

Statement of retained earnings is one of important financial statement of company. It is also called profit and loss appropriation account. In this statement, we take the help of income statement or profit and loss account for calculating current year net profit and it is prepared for balance sheet for showing current year retained earning balance.

We do many adjustments before showing the closing balance of retained earnings which will transfer to balance sheet’s shareholder’s equity section in liability side. We deduct transfer of dividend and reserve from opening balance of retained earnings.

Following is its simple formula


Opening balance of retained earning+ Net Profit – (Dividend + Reserves) = Closing balance of Retained Earnings

Following is its format 



Now we explain it in detail

1. Opening Balance of Retained Earnings

Every year, we do not give whole profit to our shareholders in the form of dividend because we need also money for growth of business. If we issue new shares, it will decrease the control level of past shareholders. So, we use it as substitute of our fresh capital. If we did not use in business, it will show balance in liability side of balance sheet. We can take from our opening balance sheet. 

2. Current Year Net Profit

Every year, we make the profit and loss account which is the matching of our revenues and expenses. On this basis, we will calculate the net profit. We will add it in opening balance of retained earning. With this, our total retained earnings will increase. 

3. Withdraw of Reserves 

In past, we deduct the reserves from opening balance of retained earnings. Now, if we withdraw reserves, we again part of retained earning, so, we will add in opening balance of retained earnings.

4. Transfer to Dividend

Dividend is the amount which is given to shareholder because shareholders invest money in our company. So, they have right to get dividend. Same dividend will decrease our total profit which is in the form of retained earnings and current year net profit. 

5. Transfer to Reserves

For securing future risks, we create reserves. So, these reserves will also decrease our total profit. So, we will deduct it from our total retained earnings.

6. Provision for Taxation

Except above, if we have transferred to provision for taxation, we will deduct it from gross retained earning. If previous provision of taxation is not required, we will add in gross earning. If there is refund of income tax, we will also add in gross retained earning. 

Important :

If you are interested to buy eBook of Corporate Accounting for learning it with simple way and full time support, please call us now at 09356234925 or +91-9356234925

COMMENTS

Comments on this Website
.
Share above Content to Your Friends



Name

access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
false
ltr
item
Accounting Education: Statement of Retained Earnings
Statement of Retained Earnings
http://2.bp.blogspot.com/-3R2EC5YRnKQ/VhXXIXia77I/AAAAAAAATEI/Iq7Bl-V3RVM/s640/statement%2Bof%2Bretained%2Bearnings.PNG
http://2.bp.blogspot.com/-3R2EC5YRnKQ/VhXXIXia77I/AAAAAAAATEI/Iq7Bl-V3RVM/s72-c/statement%2Bof%2Bretained%2Bearnings.PNG
Accounting Education
http://www.svtuition.org/2015/10/statement-of-retained-earnings.html
http://www.svtuition.org/
http://www.svtuition.org/
http://www.svtuition.org/2015/10/statement-of-retained-earnings.html
true
2410664366776677676
UTF-8
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at vinod@svtuition.org for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock