Technology Networking & Internet

How to Derive Retained Earnings from Net Income

By Technology Last updated Sunday, June/02/2024

1). Locate the starting balance of the retained earnings account. The starting balance for this accounting period is equal to the ending balance in the retained earnings account for the last accounting period.
2). Identify the net income amount for the accounting period as listed on the Income Statement. The net income balance may be listed as a net loss if it is negative for this period. Identify the dividend amount allocated during the period, if any.
3). Reduce the retained earnings account by any dividends that were paid. Add the net income figure if the business shows an income for the period or reduce retained earnings by the amount reflected as a net loss. The final result is the current retained earnings balance.

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