retained earnings statement

Examples of retained earnings statement in the following topics:

• Introduction to the Retained Earning Statement

  • The statement of retained earnings explains the changes in a company's retained earnings over the reporting period.
  • The retained earnings statement explains the changes in a company's retained earnings over the reporting period.
  • The retained earnings statement may appear in the balance sheet, in a combined income statement and changes in retained earnings statement, or as a separate schedule.
  • Ending Retained Earnings = Beginning Retained Earnings − Dividends Paid + Net Income.
  • The statement of retained earnings uses information from the income statement and provides information to the balance sheet.

• Special Reporting

  • Other special reporting issues include Earnings per Share, Retained Earnings and Intraperiod Tax Allocation.
  • The earnings per share can appear on the income statement or in the notes to the income statement.
  • Retained Earnings: The statement of retained earnings explains the changes in a company's retained earnings over the reporting period.
  • It may appear in the balance sheet, in a combined income and changes in retained earnings statement, or as a separate schedule.
  • In essence, the statement of retained earnings uses information from the income statement and provides information to the balance sheet.

• LIFO Method

  • A merchandising company can prepare an accurate income statement, statements of retained earnings, and balance sheets only if its inventory is correctly valued.
  • On the income statement, a company using periodic inventory procedure takes a physical inventory to determine the cost of goods sold.
  • Since the cost of goods sold figure affects the company's net income, it also affects the balance of retained earnings on the statement of retained earnings.
  • On the balance sheet, incorrect inventory amounts affect both the reported ending inventory and retained earnings.
  • Summarize how using the LIFO method affects a company's financial statements

• Relationships Between Statements

  • The four most common financial statements are the balance sheet, income statement, statement of cash flows and the statement of stockholder's equity.
  • Each statement has a specific purpose; the income statement reflects a company's profitability, while the statement of retained earnings shows the change in retained earnings between the beginning and end of a period (e.g., a month or a year).
  • The income statement reports the profitability of a business by comparing the revenues earned with the expenses incurred to produce these revenues.
  • The statement of shareholder's equity connects the income statement and the balance sheet.
  • The statement of shareholder's equity explains the changes in retained earnings between two balance sheet dates.

• Financial Statement Notes

  • While the Income Statement, Balance Sheet, Cash Flow Statement, and Statement of Retained Earning contain all numeric information about the company, these numbers often require a better explanation.
  • Notes to financial statements are added to the end of financial statements.
  • These notes help explain specific items in the financial statements.
  • The notes clarify individual line items on the various statements.
  • Notes on the financial statements convey specific information about the line-items on the statement.

• Overview of Statement Changes and Errors

  • Make an offsetting adjustment to the opening balance of retained earnings for that period; and
  • If the financial statements are only presented for a single period, then reflect the adjustment in the opening balance of retained earnings.
  • Yet when retained earning for year Z is correct, because the two previous errors cancelled each other out.
  • If the error has not counterbalanced then an entry must be made to retained earnings.
  • If the error has not counterbalanced, an entry is necessary to adjusted beginning retained earnings and correct the current period.

• Dividends Payable

  • When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be distributed to shareholders as dividends.
  • Many corporations retain a portion of their earnings and pay out the remaining earnings as a dividend.
  • The per share dividend amount is multiplied by the number of shares outstanding and this result is debited to retained earnings and credited to dividends payable.
  • Explain what a dividend is and how it is reported on the financial statements

• Times Interest Earned Ratio

  • Times Interest Earned Ratio = Earnings before Interest and Taxes (EBIT) / Interest Expense.
  • Earnings before Interest and Taxes (EBIT) can be calculated by taking net income, as reported on a company's income statement, and adding back interest and taxes.
  • Analysts often use "Operating Income" as a proxy for EBIT when complex accounting situations, such as discontinued operations, changes in accounting principle, extraordinary items, etc., are reported in a company's financial statements.
  • Analysts will sometimes use EBITDA instead of EBIT when calculating the Times Interest Earned Ratio.
  • The Times Interest Earned Ratio is an indication of a company's overall financial health.

• Introduction to the Statement of Cash Flows

  • The income statement is accrual based.
  • It shows net income, which is calculated as follows: revenues earned minus the expenses incurred in order to earn those revenues.
  • The Statement of Cash Flows is composed of three sections:
  • The statement of cash flows shows the liquidity of a company.
  • Describe the effect operating, investing and financing activities have on the statement of cash flows, and how that statement differs from the income statement

• Income Statement Formats

  • Income statements are commonly prepared in two formats: multiple-step and single-step.
  • An income statements may also be referred to as a profit and loss statement (P&L), revenue statement, statement of financial performance, earnings statement, operating statement or statement of operations.
  • Income statements are commonly prepared in two formats: multiple-step and single-step.
  • The income statement is used to assess profitability, as the expenses for the period are deducted from the revenues.
  • Thus, the balance sheet has a direct relation with the income statement.