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What is an Earnings Statement?

 

An Earning Statement, also known as Pay Slip, is a document provided by an employer to an employee during each pay period, generally bi-weekly or monthly. It showcases the employee’s earnings and deductions for that particular pay period.

 

An Earning statement includes the following information:

 

 

What is a Retained Earnings Statement?

 

A Retained Earning Statement is a financial statement showcasing the changes in a company’s retained earnings over a couple of periods. This is a crucial part of the financial statement that the corporation issues, as it helps the stakeholders like investors and management understand the company’s profit reinvestment policy and where this is disturbed to shareholders.

 

Retained Earnings includes the following information:

 

  • Beginning Related Earning
  • Net Income
  • Dividend Declared and Paid
  • Ending Retained Earnings

 

How to Prepare a Statement of Retained Earnings?

 

Preparing a statement of retained earnings is a crucial step for financial data from a company’s accounting records and following a step-by-step process of calculating the ending balance of retired payments for a certain period. It involves the following steps:

 

  • Resolve the beginning balance of the retained earnings: This can be found on the previous period’s balance sheet or the last period’s statement of retained earnings.

 

  • Add the Net Income or Deduct the Net Loss: This information can be found on the company’s income statement for the reported period.

 

  • Deduct any Dividends paid to Shareholders during the Period: This information can be found on the company’s cash flow statement or at the board of directors’ meeting.

 

  • Calculate the Ending Balance of the Retained Earnings: This is the final balance of retained earnings for the period being reported and is calculated by adding the beginning balance of retained earnings to the net income (or deducting the net loss) and then removing any dividends paid to shareholders during the period.

 

  • Produce a Statement of Retained Earnings: The statement should always begin with the beginning balance of retained earnings, followed by the net income or net loss for the period, the dividends paid to shareholders, and the ending balance of retained earnings.

 

The statement of retained earnings can be included as a separate financial statement or a section of the company’s balance sheet. It is generated quarterly or annually, that solely depends upon the company’s reporting requirements.

 

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