Retained Earnings Calculator

Formula

Ending retained earnings = beginning retained earnings + period net income − dividends.

Worked example

With Beginning retained earnings: 100000 currency units, Net income for period: 25000 currency units, Dividends declared: 5000 currency units, ending retained earnings is 120,000.00 currency units.

Inputs and calculation

Take the opening retained earnings balance from the same accounting basis. Add profit or subtract a net loss for the period, then remove distributions to owners that are recognized as dividends. The displayed relationship is Ending retained earnings = beginning retained earnings + period net income − dividends. Keep the fields' displayed units attached when reproducing this relationship by hand.

Worked numerical example

For example, enter beginning retained earnings 100,000 currency units, net income for period 25,000 currency units, dividends declared 5,000 currency units. Those inputs produce ending retained earnings of 120,000 currency units.

Holding the other example values fixed, change beginning retained earnings from 100,000 to 110,000 currency units. The main output becomes 130,000 currency units. This comparison isolates the effect of that one input.

How to read and use the result

The ending balance is an accumulated equity account, not a bank balance or cash available to spend. It can be negative after sustained losses or prior distributions. Check a basic retained-earnings roll-forward in a small-business statement.

Practical context

Opening retained earnings of 100,000 plus 25,000 net income and less 5,000 in dividends produces a 120,000 ending balance. The company may still have very little cash if customers have not paid invoices or profit was reinvested in equipment.

Assumptions and scope

All three amounts refer to the same company and accounting period. Corrections to prior periods, stock transactions and other equity movements are outside this simple roll-forward. Replace the example defaults with measured inputs for your situation and account separately for factors outside these fields.

Checks and common mistakes

Do not confuse revenue with net income. A profitable period can still have negative cash flow, and declaring dividends does not mean all profit has been paid out.

Common questions

What should I verify before using the Retained Earnings Calculator result?

A net loss can reduce or turn this cumulative account negative. Use amounts from the income statement and equity records for the same reporting period; an owner draw in a different legal entity is not automatically a corporate dividend.

Sources and references

• OpenStax: Working capital and cash conversion