How to Calculate Retained Earnings: Formula and Complete Guide 25 september 2024 – Posted in: Bookkeeping

Example – If a startup declares a 10% stock dividend on 10,000 outstanding shares, shareholders receive 1,000 new shares. The company records this as a reduction in retained earnings, with an offsetting increase in common stock and additional paid-in capital. They represent the portion of equity that has been reinvested into the company rather than paid out as dividends. Retained earnings appear under shareholders’ equity on the balance sheet and are affected by net income…