Instruction
1
The calculation of retained earnings is very simple, just to substitute the values in one of the following formulas and to know the amount of net profit/loss of the company.
2
In order to calculate retained earnings will require knowledge of the following indices: retained earnings at beginning of the period net profit (Net Income or Net Profit) or net loss (Net Loss) and cash dividends paid.
3
After collecting all data for calculations, substitute the values in the following formula:
RE1 = RE0 + Net Income – Dividends,
where RE1/RE0 - retained earnings at the end/beginning of that period;
Net Income – net profit;
Dividends – dividends paid to shareholders.
RE1 = RE0 + Net Income – Dividends,
where RE1/RE0 - retained earnings at the end/beginning of that period;
Net Income – net profit;
Dividends – dividends paid to shareholders.
4
In the event that the company in the current period received no net income, but rather net loss, the calculation is carried out according to the following formula:
RE1 = RE0 - Net Loss – Dividends,
where, as has become clear Net Loss - net loss.
RE1 = RE0 - Net Loss – Dividends,
where, as has become clear Net Loss - net loss.
Note
When the net loss for this period of time more retained earnings over the same period, the amount of retained earnings can be negative, creating a deficit.
Useful advice
Often, many firms use the net profit of the enterprise as a tool of investment for more income. Such areas can be treated and the purchase of innovative equipment and implementation of investment projects, and even conducting research.
To adjust the account of retained earnings should always, when you change the account of income and expenditure, adding a new record.
English term Retention Ratio (or Retained Surplus) also refers to retained earnings, however, known as "retention of profits".
Only the owners of the firm make decisions by the General meeting of shareholders or members on the distribution of profits.
To adjust the account of retained earnings should always, when you change the account of income and expenditure, adding a new record.
English term Retention Ratio (or Retained Surplus) also refers to retained earnings, however, known as "retention of profits".
Only the owners of the firm make decisions by the General meeting of shareholders or members on the distribution of profits.
