Question

What’s the formula for the statement of retained earnings and can someone please tell me????? I have an accounting test next week and I need helpppp asapppppppp

Answer 1

Current Retained Earnings + Profit/Loss – Dividends = Retained Earnings

Explanation:

Let’s say your company went into business on January 3, 2022. Your retained earnings account on January 3, 2022, will read $0 because you have no earnings to retain.

Now let’s say that in January you earn $5,000 in net income (from your income statement) and don’t issue any dividends.

That means that on February 3, your company’s retained earnings will be $5,000:

Current retained earnings + Net income - Dividends = Retained earnings

$0 + $5,000 - $0 = $5,000

This makes sense: you earned $5,000 in profits and retained all of them.