The statement of equity (and similarly the equity statement, statement of owner's equity for a single proprietorship, statement of partner's equity for a partnership, and statement of retained earnings and stockholders' equity for a corporation) are basic financial statements.
These statements explain the changes of the company's equity throughout the reporting period. They break down changes in the owners' interest in the organization, and in the application of retained profit or surplus from one accounting period to the next. Line items typically include profits or losses from operations, dividends paid, issue or redemption of stock, and any other items charged or credited to retained earnings.
The statements are expected by generally accepted accounting principles (GAAP) and explain the owners' equity and retained earnings shown on the balance sheet, where: owners' equity = assets − liabilities.
A retained earnings statement is required by the U.S. GAAP whenever comparative balance sheets and income statements are presented . It may appear in the balance sheet, in a combined income statement and changes in retained earnings statement, or as a separate schedule. Therefore, the statement of retained earnings uses information from the income statement and provides information to the balance sheet.
The Statement of Retained Earnings and Stockholders' Equity
The statement of retained earnings uses information from the income statement and provides information to the balance sheet.
Retained earnings are part of the balance sheet under "stockholders equity (shareholders' equity)" and is mostly affected by net income earned during a period of time by the company minus any dividends paid to the company's owners and stockholders. The retained earnings account on the balance sheet is said to represent an "accumulation of earnings" since net profits and losses are added / subtracted from the account from period to period.
Retained earnings are part of the statement of changes in equity. The general equation can be expressed as following: ending retained earnings = beginning retained earnings − dividends paid + net income