Retained Earnings vs. Net Income

This video discusses the difference between Retained Earnings and Net Income.

Net Income is the profit that a company earned over a set period of time, such as a month, quarter, or year. Net Income is presented on the Income Statement.

Retained Earnings is the accumulated profits of the company since its inception, minus any dividends distributed. Retained Earnings thus represents profits that have been reinvested in the business. Retained Earnings appears in the Stockholders' Equity section of the Balance Sheet.

Retained Earnings and Net Income are related in that Net Income increase Retained Earnings. For example, let's say you start a company today and in your first year of business post a Net Income of $40,000. If you don't distribute any dividends, your Retained Earnings at the end of the first year will be $40,000. If you then post a Net Income of $30,000 in your second year of business and again do not declare a dividend, your Retained Earnings balance will be $70,000 at the end of year 2.—
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[MyFinancialFocus]

Adds to the fact that the balance sheet is a permanent statement, whereas the income statement accounts are added and subtracted from the balance sheet accounts. Great video!

[BigGuy_Trades]

This is so much better than the views it's getting.

[ankit]

Never found a better explanation of Retained Earnings and Net Income than this. Thanks a lot Edspira.

[joannetalkshow]

you are a life saver! I finally understand retained earning.

[harmandhillon]

The best explanation for Retained Earnings I've heard. Thank you so much!

[huynhduong]

Just one really short video clarify all my confusion. Thanks alot❤

[juanvicencio]

I am a bit confused on the relation between cash and RE... so if a company has negative earnings but must pay dividends, they need to get the money from the cash and equivalents accounts rather than reteined earnings?...does retained earnigs also incorporate the Cash & equivalents account?...I was wondering if the RE account also shows that part of the money reteined has been invested (reccording then a decrease in RE)

[shailesh_joshi]

Best explanation I ever found on this topic. Just one question - Is it always just the dividend that gets subtracted OR are there any more factors to subtract apart from dividend?

[emanuelkubatayev]

Hello. Love you content. Excuse me please. Can you please tell me, based on what book material is this information is shared. Because it has different chapters, which is great, just curious. Or maybe you can tell me: is this information from Introduction to accounting or further classes of accounting college curriculum?

[charmanderswaifu]

This is the best explanation I've watched!! tysm for this!♥ the only problem is there's no account titles for retained earnings (accumulated earnings) showing in my final exam... are there any other terms for retained earnings? I keep on searching on google, nothing is coming out :((