Retained Earnings in English means a portion of net income that is not used to pay dividends. This part acts as an investment in your own business or to pay off the company's debt. In the lines of the balance sheet, retained earnings are indicated under the column "Equity".
Instructions
Step 1
The calculation of retained earnings is very simple, just substitute the values in one of the formulas below and know the amount of the company's net profit / loss.
Step 2
In order to calculate retained earnings, you will need to know the following indicators: retained earnings at the beginning of a given period, net profit (Net Income or Net Profit) or net loss (Net Loss) and the amount of dividends paid.
Step 3
After collecting all the data for the calculations, plug the values into the following formula:
RE1 = RE0 + Net Income - Dividends, where RE1 / RE0 - retained earnings at the end / beginning of this period;
Net Income - net profit;
Dividends - dividends paid to shareholders.
Step 4
If the company in the current period received not a net profit, but, on the contrary, a net loss, then the calculation is carried out according to the following formula:
RE1 = RE0 - Net Loss - Dividends, where, as it has already become clear, Net Loss is a net loss.
