How to calculate retained earnings?

[daisy]

I’m studying basic accounting and need help understanding how to calculate retained earnings. What’s the exact formula, and how do net income and dividends factor into the calculation? If possible, could someone provide a simple example with numbers? Trying to make sure I fully understand it before my exam.

 

[alexmetro]

It is rather easy- Retained Earnings = Beginning Retained Earnings + Net Income -Dividends. Then say you had begun with $50,000, and had earned $20,000, and had paid out $5,000 in dividends, you would be left with $65,000; that is, profits in, payouts out.

 

[Oscar]

Retained earnings are calculated by adding net income to beginning retained earnings and subtracting dividends paid during the period. The result represents profits kept in the business after distributions internally.

 

[Stacy]

To calculate retained earnings, use: Retained Earnings = Beginning Retained Earnings + Net Income – Dividends Paid. It reflects accumulated profits kept in the business, not distributed to shareholders, and adjusts each period based on income and dividend payments.