Definition

Retained earnings statement

The retained earnings statement is a financial statement that shows the changes in retained earnings during the year. The company prepares the statement from the Retained Earnings account. The Illustration below shows (in account form) transactions that affect retained earnings.

                                                   Retained earnings

1.      Net loss                                                                 

2.      Prior period adjustments for                                                       

3.      Cash dividends and stock dividends

4.      Some  disposals of treasury stock

1.      Net income

2.       Prior period adjustment for understatement of net income

As indicated, net income increases retained earnings, and a net loss decreases retained earnings. Prior period adjustments may either increases or decreases retained earnings. Both cash dividends and stock dividends decrease retained earnings. The circumstances under which treasury stock transactions decreases retained earnings.

Share it:  Cite

More from this Section

  • Raw materials inventory
    Raw materials inventory is a general ledger account. It is also referred to as a control ...
  • Capital stock
    Capital stock consists of preferred and common stock. Preferred stock appears before common ...
  • Temporary & Permanent accounts
    Temporary accounts relate only to a given accounting period. They include all income statement ...
  • Adjusted trial balance
    Adjusted trial balance is a list of accounts and their balances after the company has ...
  • Purchase discount
    Purchase discount means a cash discount claimed by a buyer for prompt payment of a balance ...