Retained Earnings Journal Entry Examples, Concepts, Illustrations, Sample help Online

Looking for Retained Earnings Journal Entry Examples, Concepts, Illustrations and calculation to do your assignments, homework or project then you are at the right place.

What is Retained Earnings?

Retained Earnings refer to those left over earning of a business firm which is acquired after distributing dividends to the shareholders of the company out of profits earned each year. It is the net income or loss, minus any stockholder’s dividends. It either accumulated loss or accumulated profit for the year. The journal entry for retained earnings if there is profit in that particular year would be as follows

Profit and Loss a/c Dr.
To Retained Earnings
If the business made a loss for the year the journal entry would be
Retained Earnings Dr.
To Profit and Loss a/c
Formula for calculation of retained earnings
Retained Earnings = Beginning Retained Earnings + net income – dividends.

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Retained Earnings Journal Entry Example Explanation

Let’s understand Retained Earnings Journal Entry better with the help of an example

Example: Suppose a business has net income of $60000 and declares a dividend of $10000. Retained Earnings at the beginning of the year are $20000

Retained Earnings = Net income – Dividend = $60000 – $10000 = $50000
The ending balance on the retained earnings account will be:
Retained Earnings = $20000 + $50000 = $70000

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