Formula used
How to use this calculator
- Select the value you want to calculate.
- Enter opening retained earnings and current-period activity.
- Add dividend categories and accounting adjustments.
- Enter equity components for balance sheet reconciliation.
- Add forecast periods when multi-period planning is required.
- Submit the form and review warnings carefully.
- Copy, print, or export the completed results.
Example data
| Item | Example amount |
|---|---|
| Beginning retained earnings | £120,000 |
| Net income | £45,000 |
| Cash dividends | £15,000 |
| Prior-period adjustment | (£2,000) |
| Ending retained earnings | £148,000 |
Frequently asked questions
What are retained earnings?
Retained earnings are accumulated profits kept within a company. They decrease through losses, dividends, and certain adjustments. The balance appears within shareholders’ equity on statements.
Are retained earnings the same as cash?
No, retained earnings are an equity account. Cash is a separate asset reported elsewhere. Profits may be invested in many business resources.
How does a net loss affect retained earnings?
A net loss reduces retained earnings for the period. Enter the loss as a negative number. The calculator then subtracts it automatically during calculation.
Which dividends reduce retained earnings?
Cash dividends normally reduce retained earnings when declared. Stock dividends can also reclassify retained earnings. Preferred dividends should be included when they apply.
What is an accumulated deficit?
An accumulated deficit means retained earnings became negative. It usually results from cumulative losses or distributions. The result remains part of shareholders’ equity reporting.
What are prior-period adjustments?
They correct material errors from earlier financial periods. They may increase or decrease opening retained earnings. Professional accounting review is advisable for material corrections.
How does equity reconciliation work?
The calculator combines entered equity account balances together. Treasury shares are deducted from total shareholders’ equity. Any difference highlights a possible reporting inconsistency immediately.
Can retained earnings restrict dividends?
Yes, laws or agreements may restrict available distributions. Boards may also maintain voluntary minimum reserves. Review applicable rules before declaring any business dividend.
What is the retention ratio?
The retention ratio shows profit kept within operations. It equals one minus the dividend payout ratio. A higher result indicates more earnings remain invested.
Can this calculator replace financial statements?
No, it supports planning and checking only. Final statements require complete accounting records and policies. Seek qualified advice for regulated financial reporting decisions.