In accounting a Statement of Retained Earnings reflects the retained earnings of a business at a point in time. When referring to financial statements it is important to recognize that they are reporting on a specific period of time; they provide a snap-shot of how the business is doing for that period of time. In order to complete the Statement of Retained Earnings, the Income Statement must be completed first as the Net Income(or Loss) is an entry in this financial statement.

Note the following:

1. The first entry, Retained Earnings, is based on the ending retained earnings from the previous reporting period. If the business is new, and it is the first time reporting, then Retained Earnings will be $0.

2. Net Income comes from the Income Statement.

3. Dividends, if there are any, will be subtracted from Retained Earnings.

Below is an example of what a Statement of Retained Earnings will look like:



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Shoe Burger Corp.
Statement of Retained Earnings
08/1/2018
Retained Earnings (from previous month): $400
Net Income for the Month: $5,000
$5,400
Dividends ($2,000)
Retained Earnings 8/31/2018 $3,400