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View Full Version : What are the transactions that affected retained earnings?


noos
May 3, 2008, 06:31 AM
What are the transactions that affected retained earnings?

morgaine300
May 3, 2008, 10:00 PM
Only 3 things affect retained earnings: revenues increase it, expenses decrease it, and dividends decrease it. But there can be several different "transactions" involved that involve these items, so it's not so much specific transaction you need to be concerned with, but rather those 3 specific items.

The retained earnings is the net income of the company (revenues less expenses, gotten off the income statement), less any dividends that were paid out to stockholders. If you've already done sole proprietorships, dividends are the corporation equivalent of drawing. (Except the stockholders aren't the ones deciding when and how much is paid.) Dividends are the portion of the net income that is being paid back out to the stockholders. Since it has to come out of the net income, that reduces retained earnings.