About the Retained Earnings Calculator
Retained earnings are the cumulative profits a company has kept rather than paid out to shareholders. This retained earnings calculator rolls the balance forward for one accounting period: it starts with beginning retained earnings, adds net income (or subtracts a net loss), deducts cash and stock dividends declared, applies any prior-period adjustment, and returns the ending balance that goes on the balance sheet.
Bookkeepers closing the year, students preparing a statement of retained earnings, and owners of corporations checking how much profit has been reinvested can all use it. The calculator also shows the dividend payout ratio and retention ratio so you can see what share of this period’s profit was kept in the business.
Enter dividends as positive numbers — they are subtracted automatically. Prior-period adjustments (corrections of errors in earlier statements, net of tax) can be positive or negative. A negative ending balance is called an accumulated deficit.
With the default inputs, the ending retained earnings is $610,000.00. Change any value above to recalculate instantly.
How to use the retained earnings calculator
- 1Enter beginning retained earnings from last period’s balance sheet.
- 2Enter net income for the period (negative if the company made a loss).
- 3Enter cash and stock dividends declared during the period.
- 4Add any prior-period adjustment, net of tax.
- 5Read the ending balance and copy the statement of retained earnings.
Formula and method
Retained earnings link the income statement to the balance sheet. Each period, net income is closed into retained earnings (a net loss reduces it) and dividends declared to shareholders are deducted. Stock dividends move value from retained earnings into contributed capital, so they also reduce retained earnings even though no cash leaves the company.
Prior-period adjustments correct material errors in previously issued statements and are recorded directly against the opening balance, net of tax, rather than through this period’s income. The payout ratio compares cash dividends with net income, and the retention (plowback) ratio is the remainder — the share of profit reinvested. Both ratios are only meaningful when net income is positive.
- RE
- Retained earnings
- Net income
- Profit (or loss) for the period from the income statement
Worked examples
Profitable year with a cash dividend
Starting at $500,000, adding $150,000 net income and subtracting $40,000 of dividends gives $610,000 ending retained earnings. The company paid out 26.7% of profit and retained 73.3%.
Net loss year
An $80,000 loss and a $20,000 dividend reduce retained earnings from $200,000 to $100,000. The payout and retention ratios are not meaningful when there is no profit, so the calculator flags them instead of showing a number.
Stock dividend and an error correction
A −$15,000 prior-period correction restates the opening balance to $1,185,000. Adding $300,000 net income and deducting $90,000 cash and $50,000 stock dividends gives $1,345,000. Cash payout is 30% of profit.
Frequently asked questions
What is the retained earnings formula?+
Ending retained earnings = beginning retained earnings + net income (or − net loss) − dividends declared, adjusted for any prior-period corrections. It is the cumulative profit a company has kept since it began.
Are retained earnings the same as cash?+
No. Retained earnings are an equity account showing reinvested profit; that money may already have been spent on equipment, inventory or debt repayment. A company can have large retained earnings and little cash.
Why do stock dividends reduce retained earnings?+
A stock dividend transfers value from retained earnings to common stock and additional paid-in capital. Total equity is unchanged, but retained earnings fall by the value of the shares distributed.
Can retained earnings be negative?+
Yes. When cumulative losses and dividends exceed cumulative profits, the balance is negative and is reported as an accumulated deficit. Startups often show an accumulated deficit for several years.
Where do retained earnings appear in financial statements?+
The ending balance appears in the shareholders’ equity section of the balance sheet. The movement during the year is shown in a statement of retained earnings or within the statement of changes in equity.