The Retained Earnings Statement is a financial statement which documents how much of the business’s profits are keep in the business for future use and how much of the profits are distributed to the owners.
The Retained Earnings Statement is computed by staring with beginning Retained Earnings, adding net income, and subtracting the dividends or owner’s draw. The beginning Retained Earnings are the accumulated profits kept in the business from the inception of the company. The Net Income comes from this month’s income statement. The dividends (for a corporation) or draw (for a sole proprietorship or partnership) are the amount of profits the owners withdrew this month.