Balance Sheet Examples

Monday, December 2nd 2019. | resumes

Balance-Sheet-Examples Balance Sheet Examples

 

Balance Sheet Examples

Accounting courses are aimed at people who want to learn basic or intermediate bookkeeping. One of the topics covered in this article is the relationship between the balance sheet and retained earnings (RE), which covers the concept of accumulated profit or loss and its relationship to one of the main financial statements. Also in this article you can examine practical examples of this relationship.

concepts

In view of the concept of retained earnings, it is considered as a profit that results from the business operations and is not distributed as a dividend to the shareholders. This amount can also be negative if the business has accumulated losses that were not covered by the shareholders’ investments.

The retained earnings are part of the equity in the balance sheet on the side of liabilities and equity. To calculate this balance, we start from the income statement, which shows net income for the period, and if it is not distributed to shareholders as a dividend, the balance of renewable energy increases. If we have a negative amount in the income statement (ie a net loss), the amount of retained earnings in the balance sheet decreases.

If part of the profit for the period is distributed to shareholders as a dividend, only the remaining amount increases by RE.

Practical example

To illustrate the above context, a simplified profit and loss account for the first year of operations is provided below:

Income ______________ $ 15,000

Issues ______________ $ 9,560

Net profit ______________ 5,440 USD

Net income of $ 5,440 at year-end is included in the following balance sheet:

Assets ______________ $ 32000

Liabilities & equity

Liabilities ___________ 6,560 USD

equity

Share capital ____________ $ 20000

Retained earnings ________ $ 5,440

Equity __ 25,440 USD

Liabilities and equity total __ $ 32,000

Based on the above, you can see that the entire amount of net income ($ 5,440) that was not distributed as a dividend is included in the balance sheet under “Equity” in the RE item.