6 Statement of Changes in Equity
Linking the Income Statement to the Statement of Financial Position
Jacqueline Gagnon
Retained Earnings
Much of this section is review, but it is worth practicing before moving on to the Statement of Changes in Equity.
Retained earnings is calculated as:
| Retained Earnings, beginning | |
|---|---|
| Net income | |
| Dividends declared | |
| Retained earnings, ending |
This calculation is on the Statement of Changes in Equity, so let’s get some practice with it!
- My Turn:
- NoT Inc. has asked you to calculate retained earnings for their fiscal year ended 31 October 20X4. Their trial balance shows retained earnings of $1,620,000 and they have reported net income of $342,000 for the year. Additionally, NoT Inc. declared dividends of $100,000 on 31 October 20X4.
| Retained Earnings, beginning | 1,620,000 |
|---|---|
| Net income | 342,000 |
| Dividends declared | (100,000) |
| Retained Earnings, ending | 1,862,000 |
Here’s one for you to try. You’ve got this!
Your Turn:6—3: YeS
Solution:6—3: Solution
Fantastic progress. One more!!
Your Turn:6—4: AnY
Solution:6—4: Solution