The Statement of Retained Earnings: A Tag-Along
There
is actually a fourth financial statement that bears
discussion: the statement of retained earnings. This
document is a reconciliation of the changes to the
retained earnings account. It can be presented in
many ways, but the most common is to append it to
the bottom of the income statement. Sample shows a
statement of retained earnings such as may be
appended to the bottom of an income statement.
This
statement starts with the closing retained
earnings from the prior year (which becomes the
opening retained earnings for the current year),
then adds the net income after taxes for the
year (or deducts the net loss), and deducts any
dividends paid to the shareholders. Remember
that dividends come out of retained earnings;
that's why they appear here and not as an
expense on the income statement.
STATEMENT OF RETAINED EARNINGS
(Sample)
Small Company
Inc. Statement of Retained Earnings For
the year ended 31 December
2003
Opening
retained earnings $11,573
Net income for the
year
68,812
Dividends (40,707)
Closing retained
earnings
$39,678
The Statement
of Retained Earnings: A Tag-Along
