Retained Earnings

[David Harrison]

On 22/11/05, Doctorcam <cam at ellisonet.ca> wrote:
> This shows up as a calculated amount in the Balance Sheet report.
> Where does it come from?  I notice that the Retained Earnings figure
> for the last fiscal year is the sum of the RE and the Net Profit for
> the previous year, which was the first year of operation.

The short answer is retained earnings is the accumulated earnings of
the company since it's inception.  Here's an example:

Year 1 - Net income of $1,000
          - Retained earnings at the end of the year = 0 + $1,000

Year 2 - Net loss of $100
          - Retained earnings at the end of the year = $1,000 - $100 = $900

Year 3 - Net income of $200
          - Retained earnings at the end of the year = $900 + $200 = $1,100

and so on.
>
> My accountant is wondering, and I'm confused.

I'd be worried if your accountant doesn't know what retained earnings are!!

>
> Thanks
>
> Cam
--
David Harrison, BAccS, CGA