Retained Earnings Equation – Formula – Example - Format

Retained Earnings represent that Portion of Profits that are retained by the business generated through profitable operations. These are utilized to pay Dividend and for other business purposes like for profitable business operations of the business or paying off debts and especially in case of Crisis or Depression period of Economy.

Retained Earnings Equation / Retained Earnings Formula

Opening Retained Earnings + Net Income for the year – Dividend = Closing Retained Earnings / Retained Loss

Example:

For Example, ABC Company has the following for the Accounting Period 2016:

Opening Retained Earnings From the previous accounting period = 4200000, Profit for the Current Accounting Period = 1000000, Dividend Declared to Shareholder = 500000, then the Closing Retained Earnings can be calculated by using above Equation or Formula.

4200000 + 1000000 – 500000 = 4700000

Format

ABC

Statement of Retained Earnings

For The Year 2016

                                                                                 Rs.

Opening Retained Earnings                                  4200000

+ Net Income For the Year 2016                          +1000000

- Dividend Declared to shareholders                     -500000

=   Ending Retained Earnings                                     4700000

So, it is all about Retained Earnings Equation or Formula, Example and Format. Hopefully, now you will be able to understand about this term in a better way.