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    dottie_719's Avatar
    dottie_719 Posts: 3, Reputation: 1
    New Member
    		  
    #1

    Jun 18, 2009, 01:30 PM
    Accounting
    Do you subtract depreciation expense from your retain earning statement if it was not recorded in the prior year.

    Retain Earning $25,000
    Net Income 12,000 = $37,000
    Dividends - 5,000 = $32,000
    Depreciation Expense +/- 3,000


    My guess would be to subtract, which would give be a total of

    $29,000

    Please help!:confused:
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
    Senior Member
    		  
    #2

    Jun 23, 2009, 07:16 AM

    Depreciation expense not recorded in the earlier year is an error and any correction will be made in the opening balance of the retained earnings:

    Retained Earning brought forward $25,000
    Adjustment for error- depreciation expense (3,000)
    Revised retained earnings $22,000
    Net Income for the year. . 12,000
    Dividends.. . (5,000)
    Retained earnings carried forward $29,000
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