We were however given at the end of the accounting period, which was $45,000. The share premium moved from $60,000 to $73,000 during the current reporting period. The difference would be our share premium for our current reporting period. The equity statement can be an important tool for investors when making decisions about whether or not to invest in a company. It can also be helpful for creditors when considering whether or not to extend credit to a company. The retained earnings statement is known by different other names depending on the nature of the business or entity.

The resultant number may be either positive or negative, depending upon the net income or loss generated by the company over time. Alternatively, the company paying large dividends that exceed the other figures can also lead to the retained earnings going negative. On the other hand, though stock dividends do not lead to a cash outflow, the stock payment transfers part of the retained earnings to common stock. For instance, if a company pays one share as a dividend for each share held statement of retained earnings example by the investors, the price per share will reduce to half because the number of shares will essentially double. Because the company has not created any real value simply by announcing a stock dividend, the per-share market price is adjusted according to the proportion of the stock dividend. Here is an example of how to prepare a statement of retained earnings from our unadjusted trial balance and financial statements used in the accounting cycle examples for Paul’s Guitar Shop.

Real Company Example: Coca-Cola Retained Earnings Calculation

Notice the net income of $4,665 from the income statement is carried over to the statement of retained earnings. Dividends are taken away from the sum of beginning retained https://www.bookstime.com/ earnings and net income to get the ending retained earnings balance of $4,565 for January. This ending retained earnings balance is transferred to the balance sheet.

Nansel is a serial entrepreneur and financial expert with 7+ years as a business analyst. He has a liking for marketing which he regards as an important part of business success.He lives in Plateau State, Nigeria with his wife, Joyce, and daughter, Anael. – total comprehensive income for the period, showing separately amounts attributable to owners of the parent and to non-controlling interests. This means the Company issued the shares at a higher value than the par value of $2.50. Since we have all the balances we need for preparing a statement of changes in equity, it will look like this.