{"id":35294,"date":"2024-05-31T19:39:22","date_gmt":"2024-05-31T14:39:22","guid":{"rendered":"https:\/\/chartexpo.com\/blog\/?p=35294"},"modified":"2026-02-17T15:15:28","modified_gmt":"2026-02-17T10:15:28","slug":"statement-of-retained-earnings-example","status":"publish","type":"post","link":"https:\/\/chartexpo.com\/blog\/statement-of-retained-earnings-example","title":{"rendered":"Statement of Retained Earnings: Definition & Example"},"content":{"rendered":"

So, how do businesses determine their financial growth over time? Statement of retained earnings example. This phrase may sound technical, but it is crucial for understanding a company’s profit reinvestment.<\/p>\n

\"Statement<\/a><\/div>\n
\"\"<\/a> \"\"<\/a> \"\"<\/a><\/div>\n

This financial statement provides a view of what a company chooses to do with its profits whether to distribute them to shareholders as dividends or retain them to invest in future expansions.<\/p>\n

A statement of retained earnings example links the income statement and balance sheet. It communicates the company’s specifics on what to do to the stockholder\/owner after earning profits. For instance, in 2023, Apple Inc. reported a whopping $20 billion in retained earnings. This signals their strategy for long-term growth and stability.<\/p>\n

Incorporating this statement in financial analysis is crucial. It can indicate a company’s maturity whether it’s in a position to reinvest in its own growth or reward shareholders through dividends.<\/p>\n

A second glance at a statement of retained earnings example can reveal much about a company’s operational efficacy. For example, a consistent increase in retained earnings might suggest a company is expanding or innovating. A decrease could signal financial struggles or hefty dividend payouts.<\/p>\n

To sum up, the statement of retained earnings is not just a figure on a spreadsheet. It’s a snapshot of a company’s fiscal health and strategic choices. By examining this statement, one can gauge the potential for future ventures or the likelihood of receiving dividends.<\/p>\n

Let’s discuss why the statement of retained earnings example is an indispensable tool for investors and analysts.<\/p>\n

Table of Contents:<\/h3>\n
    \n
  1. What is a Statement of Retained Earnings?<\/a><\/li>\n
  2. How Do You Calculate Retained Earnings on a Balance Sheet?<\/a><\/li>\n
  3. How Do You Prepare a Retained Earnings Statement?<\/a><\/li>\n
  4. How Do You Examine the Statement of Retained Earnings?<\/a><\/li>\n
  5. What are the Benefits of the Statement of Retained Earnings?<\/a><\/li>\n
  6. Wrap Up<\/a><\/li>\n<\/ol>\n

    First…<\/p>\n

    What is a Statement of Retained Earnings?<\/h2>\n

    Definition:<\/strong> The statement of retained earnings summarizes a company’s retained earnings during a given period. The statement offers a ledger account of how net income<\/a> and dividends affect the retained earnings balance. The statement is prepared from the start to the end of the period involved.<\/p>\n

    The statement typically starts with the beginning balance of retained earnings from the previous period. Then, it adjusts for net income or loss generated during the current period. Dividends paid to shareholders are deducted from the retained earnings balance. Other adjustments, such as changes in accounting policies or corrections of errors, are also accounted for. This results in the ending balance of retained earnings.<\/p>\n

    The statement of retained earnings is crucial as it helps stakeholders learn how the company reinvests or distributes its profits. It also helps one understand the company’s financial performance and dividend policy. The statement is considered part of a company’s financial reporting. It is usually prepared with other financial statements<\/a>, including income statements and balance sheets.<\/p>\n

    How Do You Calculate Retained Earnings on a Balance Sheet?<\/h2>\n

    Retained earnings refer to the accumulated profits of a company that have not been distributed to shareholders as dividends. Calculating retained earnings in a balance sheet involves the following:<\/p>\n

      \n
    1. Determine the beginning retained earnings<\/strong>: A typical balance sheet includes the beginning retained earnings obtained from the previous accounting period. This refers to all the profits the company retained to that point.<\/li>\n
    2. Add net income or loss:<\/strong>\u00a0Next, adjust the beginning retained earnings by any net income earned during the current accounting period. Net income is calculated by subtracting total expenses from total revenues in the current accounting period’s income statement.<\/li>\n
    3. Subtract dividends:<\/strong>\u00a0Subtract the total dividends paid in the accounting period from the corrected retained earnings balance. All dividends paid decrease the overall amount of profits retained by the business.<\/li>\n
    4. Account for other adjustments:<\/strong>\u00a0Correct retained earnings for significant issues, such as stock repurchases that reduce outstanding stock. Or any changes in accounting policies or errors corrected. All these adjustments help ensure the retained earnings balance sheet accurately reflects the company’s overall financial performance and activities.<\/li>\n
    5. Calculate ending retained earnings:<\/strong> After accounting for all adjustments, the resulting figure represents the ending retained earnings balance for the current accounting period. This balance is reported on the balance sheet. It carries over as the beginning retained earnings balance for the subsequent period.<\/li>\n<\/ol>\n

      The formula for calculating retained earnings is as follows:<\/p>\n

      \u00a0 \u00a0 \u00a0 \u00a0 \u00a0Retained earnings ending balance = Retained earnings starting balance + current-period net<\/strong><\/p>\n

      How Do You Prepare a Retained Earnings Statement?<\/h2>\n

      Preparing a retained earnings statement involves several key steps to reflect the changes in retained earnings accurately. Here’s how to prepare a retained earnings statement:<\/p>\n

        \n
      1. Gather financial data: <\/strong>Collect relevant financial information, including the beginning retained earnings balance, net income or loss, dividends, and other adjustments, utilizing an income statement template in Excel<\/a> for organization and accuracy.<\/li>\n
      2. Calculate beginning retained earnings:<\/strong>\u00a0Start with the beginning retained earnings balance from the previous accounting period. You can find this on the balance sheet.<\/li>\n
      3. Determine net income (or loss):\u00a0<\/strong>Calculate the net income or loss for the current accounting period by subtracting total expenses from total revenues.<\/li>\n
      4. Adjust for dividends:<\/strong>\u00a0Subtract any dividends paid to shareholders during the accounting period from the calculated net income.<\/li>\n
      5. Apply the formula:<\/strong> The formula for retained earnings is: Beginning Retained Earnings + Net Income (or Loss) Dividends = Ending Retained Earnings.<\/li>\n
      6. Prepare the statement:<\/strong> Organize the calculated figures into a statement format. Indicate the beginning retained earnings, net income (or loss), dividends, and ending retained earnings.<\/li>\n
      7. Include disclosure:<\/strong>\u00a0Provide additional disclosure if necessary, such as explanations for significant changes in retained earnings. Or details of any other adjustments made.<\/li>\n
      8. Review and finalize:<\/strong>\u00a0Carefully review the retained earnings statement for accuracy and completeness. Ensure all calculations are correct and properly supported by financial data.<\/li>\n<\/ol>\n

        How Do You Examine the Statement of Retained Earnings?<\/h2>\n

        Data whispers secrets, but only if you listen closely. Enter the statement of retained earnings, a financial enigma wrapped in numbers. It’s a tale of profits retained, not spent, a story best told visually within the framework of a 3-statement financial model<\/a>.<\/p>\n

        Now, imagine trying to decode this saga through Excel’s monochrome lens. It’s akin to painting with water on a rainy day.<\/p>\n

        But fear not, ChartExpo sails in. With its palette of vivid graphs, this tool transforms the mundane into the magnificent. It even helps you create a funds flow diagram<\/a> to view financial narratives in full color.<\/p>\n

        Let’s learn how to install ChartExpo in Excel.<\/p>\n

          \n
        1. Open your Excel application.<\/li>\n
        2. Open the worksheet and click the \u201cInsert<\/strong>\u201d menu.<\/li>\n
        3. You’ll see the \u201cMy Apps<\/strong>\u201d option.<\/li>\n
        4. In the Office Add-ins window, click \u201cStore<\/strong>\u201d and search for ChartExpo on my Apps Store.<\/li>\n
        5. Click the \u201cAdd<\/strong>\u201d button to install ChartExpo in your Excel.<\/li>\n<\/ol>\n

          ChartExpo charts are available both in Google Sheets and Microsoft Excel. Please use the following CTAs to install the tool of your choice and create beautiful visualizations with a few clicks in your favorite tool.<\/p>\n

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          Example<\/h3>\n

          Let\u2019s analyze the statement of retained earnings, as shown in the example data below, using ChartExpo and a Sankey diagram generator<\/a>.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
          Main head<\/strong><\/td>\nYear<\/strong><\/td>\nSubhead<\/strong><\/td>\nAmount<\/strong><\/td>\n<\/tr>\n
          Assets<\/td>\nY-2023<\/td>\nCash<\/td>\n83715<\/td>\n<\/tr>\n
          Assets<\/td>\nY-2023<\/td>\nAccounts Receivable<\/td>\n6,567<\/td>\n<\/tr>\n
          Assets<\/td>\nY-2023<\/td>\nInventory<\/td>\n9,825<\/td>\n<\/tr>\n
          Assets<\/td>\nY-2023<\/td>\nProperty & Equipment<\/td>\n40,145<\/td>\n<\/tr>\n
          Liabilities<\/td>\nY-2023<\/td>\nAccounts Payable<\/td>\n4,912<\/td>\n<\/tr>\n
          Liabilities<\/td>\nY-2023<\/td>\nDept<\/td>\n30,000<\/td>\n<\/tr>\n
          Shareholder’s Equity<\/td>\nY-2023<\/td>\nEquity Capital<\/td>\n70,000<\/td>\n<\/tr>\n
          Shareholder’s Equity<\/td>\nY-2023<\/td>\nRetained Earnings<\/td>\n35,340<\/td>\n<\/tr>\n
          Assets<\/td>\nY-2022<\/td>\nCash<\/td>\n81,210<\/td>\n<\/tr>\n
          Assets<\/td>\nY-2022<\/td>\nAccounts Receivable<\/td>\n5,904<\/td>\n<\/tr>\n
          Assets<\/td>\nY-2022<\/td>\nInventory<\/td>\n9,601<\/td>\n<\/tr>\n
          Assets<\/td>\nY-2022<\/td>\nProperty & Equipment<\/td>\n42,350<\/td>\n<\/tr>\n
          Liabilities<\/td>\nY-2022<\/td>\nAccounts Payable<\/td>\n4,800<\/td>\n<\/tr>\n
          Liabilities<\/td>\nY-2022<\/td>\nDept<\/td>\n50,000<\/td>\n<\/tr>\n
          Shareholder’s Equity<\/td>\nY-2022<\/td>\nEquity Capital<\/td>\n70,000<\/td>\n<\/tr>\n
          Shareholder’s Equity<\/td>\nY-2022<\/td>\nRetained Earnings<\/td>\n14,265<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n