Retained Earnings on Balance Sheet | Retained earnings debit or credit
ServicesPricingForAccountantsApril02,2020Home ➞ Blog ➞ Whyshouldyoupayattentiontotheretainedearningslineonthebalancesheet?Whyshouldyoupayattentiontotheretainedearningslineonthebalancesheet?Howdoyougetasnapshotofyourbusiness’sfinancialdataatanygivenpointintime?Yourbalancesheet.Itdetailsyourassets,liabilitiesandthevalueofyourshareholders’equity.Itshowstheoverallfinancialhealthofyourbusiness.That’swhyit’svitaltounderstandyourbalancesheet.It’scalled‘balancesheet’becauseyourassetsshouldalwaysequalyourliabilitiesplusyourshareholders’equity.It’sworthyourtimetofamiliarizeyourselfwithyourbalancesheet.Interpretingitcanalertyoutoanyriskstoyourbusiness’sfinancialviabilityincludinghavingahighdebttocashflowratioorlowcashbalance.Oneimportantindicatorofthecompany’sfinancialstabilityandfuturegrowthistheamountofretainedearnings.WherecanIfindretainedearningsonthebalancesheet?Retainedearningsarelistedunderliabilitiesintheequitysectionofyourbalancesheet.They’reinliabilitiesbecausenetincomeasshareholderequityisactuallyacompanyorcorporatedebt.Thecompanycanreinvestshareholderequityintobusinessdevelopmentoritcanchoosetopayshareholdersdividends.Itisgenerallyasoundfinancialstrategytoprioritizeaccumulatingretainedearningsforanybusinessthatstrivesforlong-termgrowth..Belowyou’llseeabalancesheetshowinganexampleofshareholderequityincludingretainedearnings.Notethatstockholdersequitymeansthesamethingasshareholdersequity.GETAFREEREVIEWOFYOURBOOKSTODAYWhatdoestheretainedearningslineonthebalancesheetmean?Retainedearningsarenetprofit(revenueandincomestreamsminusexpenses)remainingafterdividendspaidtoshareholdersandinvestorsattheendofareportingperiod.Thewayyoumanageyournetprofitovertime–particularlyretainedearnings–isanimportantconsiderationforpotentiallendersandinvestors.Yourstatementofretainedearningsisvitalwhenapplyingforaloanorinvestmentfundingbecauseitgivesinvestorsinsightintohowhealthyyourbusinessisandwhatyourbusiness’sintentionsare.Positiveretainedearningsindicateacommitmenttooverallgrowthwhere
常見投資理財問答
Peachtree retained earnings problemRetained earning statementDividends should be closed to income summary account at the end of the accounting cycleRetained earnings adjustmentRetained earnings calculation