The Retained Earnings Statement is the easiest accounting statement in the world to prepare and understand. It simply shows the amount of money that the company has at the end of the current time period (Usually Per Month, Quarter, or Year) after you adjust it for the income/loss and dividends payed during the period.
So the formula is simply
Retained Earnings at beginning of period
+ Net Income (as determined from your Income Statement)
- Dividends Paid
= Retained Earnings at end of period
And that’s all there is to it, a little addition and a little subtraction. If there is a net loss instead of positive gains with net income, then the number is simply subtracted. That case would look like the following.
Retained Earnings at beginning of period
- Net Loss
- Dividends Paid
= Retained Earnings at end of period
And of course, here is Aridni’s RE statment for December in the year 3000 using the (currently!) ficticious currency ‘Planet Aridni Dollars’
Aridni
Retained Earnings Statement
For the month ending December 31, 3000
(In Gazillions of Planet Aridni Dollars) |
| Retained Earnings, December 1 |
$25,000 |
| Add: Net Income |
$5,000 |
| Subtotal |
$30,000 |
| Less: Dividends |
$3,000 |
| Retained Earnings, Dec 31 |
$27,000 |
These statements can be useful to investors looking to find stocks with a history of high paying dividends. So if you are interested in setting up a Dividend Reinvestment Plan (commonly called a DRIP) then this should be something you might want to check out on you prospective companies before buying.
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