Statement of Retained Earnings Fully Explained

The Statement of Retained Earnings is a Financial Statement prepared by corporations that details changes in the volume of Retained Earnings over some period. Retained Earnings are profits held by a company in reserve in order to invest in future projects rather than distributed as dividends to shareholders.

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How Do You Prepare a Statement of Retained Earnings?

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Here's how to prepare a Statement of Retained Earnings for your business:

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What is the Statement of Retained Earnings Equation?

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Here is the Statement of Retained Earnings formula:

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Beginning Retained Earnings + Net Income – dividends = Ending Retained Earnings

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What is Retained Earnings on Balance Sheet?

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Retained Earnings represent a portion of the business's Net Income not paid out as Dividends. This means that the money is placed into a ledger account until it is used for reinvestment into the company or to pay future Dividends. Understanding your company's Retained Earnings is important because it enables you to understand how much money is available for activities like expansion or asset acquisition. 

The Shareholder’s Equity section of the Balance Sheet has Retained Earnings listed at the end of each accounting period. See below an Balance Sheet example imported to Google Sheets automatically with LiveFlow with Retained Earnings as an example:

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Balance Sheet:

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What is the Difference Between an Income Statement and Statement of Retained Earnings?

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An Income Statement is a financial statement that shows you the company’s Income and Expenditures. It also shows whether a company is making Profit or Loss for a given period.

See below an Income Statement example imported to Google Sheets automatically with LiveFlow.

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Income Statement:

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The Statement of Retained Earnings shows the accumulated portion of a business’s Profits that are not distributed as Dividends to shareholders but instead are reserved for reinvestment back into the business.

Use LiveFlow to pull your Balance Sheet with Retained Earnings from QuickBooks into Google Sheets in real-time, you can create Live Reports with LiveFlow. Download LiveFlow from Google Workspace Marketplace or QuickBooks App Store to track your performance automatically.

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