- Statement of retained earnings
Accountancy Key concepts Accountant · Accounting period · Bookkeeping · Cash and accrual basis · Cash flow management · Chart of accounts · Journal · Special journals · Constant Item Purchasing Power Accounting · Cost of goods sold · Credit terms · Debits and credits · Double-entry system · Mark-to-market accounting · FIFO & LIFO · GAAP / IFRS · General ledger · Goodwill · Historical cost · Matching principle · Revenue recognition · Trial balance Fields of accounting Cost · Financial · Forensic · Fund · Management · Tax Financial statements Statement of financial position · Statement of cash flows · Statement of changes in equity · Statement of comprehensive income · Notes · MD&A · XBRL Auditing Auditor's report · Financial audit · GAAS / ISA · Internal audit · Sarbanes–Oxley Act Accounting qualifications CA · CPA · CCA · CGA · CMA · CAT · CFA · CIIA · ACCA · CIA · CTP · ICAEW · CIMA · IPA · ICAN
The Statement of Retained Earnings (and similarly the Equity Statement, Statement of Owner's Equity for a single proprietorship, Statement of Partner's Equity for partnership, and Statement of Retained Earnings and Stockholders' Equity for corporation) are basic financial statements.
The statements explain the changes in a company's retained earnings over 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.
Owners' Equity = Assets − Liabilities
Requirements of the U.S. GAAP
A retained earnings statement is required by the U.S. Generally Accepted Accounting Principles (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.
Retained earnings are part of the balance sheet (another basic financial statement) under "stockholders equity (shareholders' equity)" and is mostly affected by net income earned during a period of time by the company less any dividends paid to the company's owners / 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
This equation is necessary to use to find the Profit Before Tax to use in the Cash Flow Statement under Operating Actvities when using the indirect method. This is used whenever a comprehensive income statement is not given but only the balance sheet is given.
Requirements of IFRS
IAS 1 requires a business entity to present a separate Statement of Changes in Equity (SOCE) as one of the components of financial statements.
The statement shall show: (IAS1.106)
- total comprehensive income for the period, showing separately amounts attributable to owners of the parent and to non-controlling interests
- the effects of retrospective application, when applicable, for each component
- reconciliations between the carrying amounts at the beginning and the end of the period for each component of equity, separately disclosing:
However, the amount of dividends recognised as distributions, and the related amount per share, may be presented in the notes instead of presenting in the statement of changes in equity. (IAS1.107)
For Small and Medium-size Enterprises (SMEs), the Statement of Changes in Equity should show all changes in equity including:
- total comprehensive income
- owners' investments
- owners' withdrawals of capital
- treasury share transactions
They can omit the statement of changes in equity if the entity has no owner investments or withdrawals other than dividends, and elects to present a combined statement of comprehensive income and retained earnings.
- International Financial Reporting Standards (and its requirements)
- Income statement
- Cash flow statement
- Comprehensive income
- Accumulated other comprehensive income
Wikimedia Foundation. 2010.
Look at other dictionaries:
Statement Of Retained Earnings — A financial statement outlining the changes in retained earnings for a specified period. The statement of retained earnings is prepared in accordance with generally accepted accounting principles (GAAP). The statement of retained earnings… … Investment dictionary
Statement of Retained Earnings — ⇡ Statement of Earned Surplus … Lexikon der Economics
Retained earnings — In accounting, retained earnings refers to the portion of net income which is retained by the corporation rather than distributed to its owners as dividends. Similarly, if the corporation makes a loss, then that loss is retained and called… … Wikipedia
retained earnings — Earnings of a corporation from the current as well as prior years that have neither been distributed to the shareholders as dividends nor transferred to the surplus account. Corporate earnings accumulated over time. One of a corporation s equity… … Financial and business terms
Retained earnings — Accounting earnings that are retained by the firm for reinvestment in its operations; earnings that are not paid out as dividends. The New York Times Financial Glossary * * * retained earnings retained earnings ➔ earnings * * * Earnings not… … Financial and business terms
retained earnings statement — A statement of all transactions affecting the balance of a company s retained earnings account. Bloomberg Financial Dictionary … Financial and business terms
Statement of Earned Surplus — Statement of Retained Earnings; zweiter Teil der angloamerikanischen Gewinn und Verlustrechnung, in dem die Veränderung des Gewinnvortrags dargestellt wird im Gegensatz zum ⇡ Statement of Income. Gliederung: Gewinnvortrag des letzten Jahres +… … Lexikon der Economics
statement of stockholders' equity — USA In financial accounting, a statement which presents the balances in a company s stockholders equity accounts as of the beginning and the end of a particular time period and the changes in each account during the reporting period. The major… … Law dictionary
Statement of Stockholders' Equity — USA In financial accounting, a statement which presents the balances in a company s stockholders equity accounts as of the beginning and the end of a particular time period and the changes in each account during the reporting period. The major… … Law dictionary
earnings — Income. That which is earned; i.e., money earned from performance of labor, services, sale of goods, etc. Revenue earned by an individual or business. Earnings generally include but are not limited to: salaries and wages, interest and dividends,… … Black's law dictionary