Casual Purpose Of Retained Earnings Statement

What is the purpose of a statement of retained earnings.

Purpose of retained earnings statement. The statement of retained earnings also known as the retained earnings statement is a financial statement that shows the changes in a companys retained earnings account for a period of time. The main goal of the statement is to find the retention ratio and the payout ratio. A statement of retained earnings depicts the total amount of equity in a business during a specific time period.

In other words its a financial statement that reports the transactions that increase or decrease retained earnings over the course of an accounting period. What is the Statement of Retained Earnings. This statement is used to reconcile the beginning and ending retained earnings for a specified period when it is adjusted with information such as net income and dividends.

Retained earnings statement definition A financial statement that reports the current year information contained in the general ledger account Retained Earnings. It is also called earnings surplus and represents the reserve money. It is structured as an equation such that it opens with the retained earnings at the beginning of the reporting period makes adjustments for items such as net income and dividends.

The statement of retained earnings is a financial report that shows the changes in the retained earnings account over a period of time. By tracking and analyzing past and current retained earnings statements you can get a clear idea of whether or not your business is growing and how past financial decisions have impacted the company. Why is the statement of retained earnings important.

The statement will include the beginning balance prior period adjustments net income for the current period dividends declared in the current period and the ending balance. The statement of retained earnings reconciles changes in the retained earnings account during a reporting period. It is a measure of the assets of your operation that have been generated through profitable activity retained in your business and not paid out to shareholders as dividends.

Benefits of a Statement of Retained Earnings The purpose of releasing a statement of retained earnings is to improve market and investor confidence in the organization. It is useful for understanding how management utilizes the profits generated by a business. By definition retained earnings are the cumulative net earnings or profits of a company after accounting for dividend payments.