The
Definition Of

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:

More from this Section

  • Stock splits
    A stock split, like a stock dividend, involves issuance of additional shares to stock holders according to their percentage ownership.
  • Closing the books
    At the end of the accounting period, the company makes the accounts ready for the next period. This is called closing the books. In closing the books, the company...
  • Payment date
    On the payment date the company mails dividend checks to the stockholders and records the payment to the dividend.
  • Controllable cost
    All costs and revenues are controllable at some level of responsibility within a company. This truth underscores the adage by the CEO of any organization that...
  • Labor price variance
    Labor price variance is the difference between the actual hours times the actual rate and the actual hours times the standard rate for labor.
  • Categories of securities
    For purposes of valuation and reporting at a financial statement date, companies classify debt and stock investments into three categories:
  • Trademark /Trade names
    A trademark or trade name is a word, phrase, jingle, or symbol that identifies a particular enterprise or product.