Statement of Retained Earnings
A financial statement that reconciles the opening and closing retained earnings balance by showing net income earned and dividends declared.
What is Retained Earnings Statement?
The statement of retained earnings bridges the income statement and the balance sheet by showing how net income and dividend distributions affect retained earnings during a reporting period. It begins with the opening retained earnings balance, adds net income (or subtracts a net loss), deducts dividends declared, and arrives at the ending retained earnings balance that appears on the balance sheet. This statement is a required component of a complete set of GAAP financial statements and may appear as a standalone document or within the statement of changes in stockholders' equity. It provides investors with insight into how much profit management reinvests in the business versus returns to shareholders.
Example
Microsoft began FY2024 with $36.0 billion in retained earnings. During the year it earned $88.1 billion in net income and paid $22.3 billion in dividends, ending the year with $101.8 billion in retained earnings — a gain of $65.8 billion, fully reconciled in the statement of retained earnings.
Source: Microsoft Annual Report FY2024