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Instructions for Retained Earnings Statement

Love Thy Pets Inc., Retained Earnings Statement For the Year Ended, December 31, 2011

Retained Earnings, January 1, 2011 Add: Net Income Deduct: Dividends Retained Earnings, December 31, 2011


Step-by-Step Instructions
Start with the three-line header for the statement. First the name of the corporation, second the title of the statement, and third the fiscal period for which the statement is being prepared. 1. On the first line in the body of the statement, place the amount of the beginning retained earnings. The amount maybe $0 if the corporation has not pervious earnings otherwise the amount will come from the balance sheet of the prior year. 2. On the next line, place the title Add: Net Income in the left column. The amount for the right column will come from the current income statements ending balance. Because the dollar amount of net income comes from the income statement, an income statement must be prepared before the retained earnings statement. 3. On the third line, add the beginning of the years retained earnings to the net income for the year. If there were a net loss, it would be subtracted from the beginning of the years retained earnings. The third line does not have a title in the left column. 4. On the fourth line, place the title Deduct: Dividends. The amount for this line will be retrieved from the trial balance sheet or from the ledger account for cash dividends. 5. Finally, on the fifth line place the title Retained Earnings, December 31, 2011. The amount for this line will be achieved by subtracting dividends from the results on line three.

Place dollar signs in the dollar amounts column at the beginning and ending of the statement. Single under line all additions or subtractions and double underline the final total.

MJC Revised 10-2011

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