How To Calculate Retained Earnings With Assets And Liabilities
Retained Earnings can be calculated when the values of assets and liabilities are given by using Accounting Equation as shown below: Assets = Liabilities + Equity Equity = Assets – Liabilities After finding equity, we can find Retained Earnings by applying following formula (derived from Statement Of Changes In Equity ) as shown below: Retained Earnings = Equity - (Share Capital + Share Premium + Common Stock) + Transfer to Capital Reserves Example: From the balance sheet of ABC company, the company has assets of $5,000,000 and liabilities $250,000. Share premium is $300. Calculate RE. First of all, we need the value of equity then we can compute RE easily as shown below: Equity = $5,000,000 - $250,000 = $4,750,000 RE = $4,750,000 - $300 = $4,749,700