The Retained Earnings Statement Should Be Prepared
The Statement of Retained Earnings should be prepared after the I ncome Statement b ut b efore Stateme nt of Financial Position or b ala nce s h eet as we want to know w h ic h portion of net income is retained in t he b usi ness for running t he b usi ness, for emerge ncy purposes and for any ot her purposes a nd w hich is used to pay divide nd to s hareholders / stockholders as they share their co ntrib utio n to t he net income of t he b usi ness. There is also a valid reason to prepare retained earnings statement after income statement b ut b efore b ala nce s heet is that we ca n easily c heck whether the b usi ness is i n a positio n to invest or to expand or to grow or to payoff easily from retained earnings or it needs loan or need more investment s hares from ow ners. Also, due to Proper Order of Financial Statements , it is h ig h ly recommended to prepare firstly Income Statement, t h en statement of retained earnings in t he seco nd order ...