How To Calculate Retained Earnings

Last Updated on August 16, 2023 by Jake Sheridan

In this tutorial, you will learn how to calculate retained earnings in Google Sheets.

How To Calculate Retained Earnings in Google Sheets

Retained earnings are an essential financial metric that businesses use to measure their financial health. It is calculated by subtracting the cumulative dividends that have been paid to shareholders from the cumulative net income of the company.

Suppose you currently have retained earnings amounting to $1000. During the month of December, your business was able to earn a net profit of $8,000. Your company decides to share $3000 of the profit to their shareholders in the form of cash dividends.

By March, you should have retained earnings of $1000 + $8000 – $3000 = $6000

Retained earnings are important to measure the financial stability of the business, as it allows you to see how much money is being held by the company for future investments and growth. A higher value for this metric implies that the business is more able to reinvest its earnings and may distribute these earnings to shareholders.

In this guide, we will show you how to calculate retained earnings in a Google Sheets spreadsheet.

How To Find Company Retained Earnings in Google Sheets

Here’s how to find the retained earnings of your company in Google Sheets.

Step 1

First, we must identify the current retained earnings accumulated from the prior period.

In our example, our business starts the month with $1000 in retained earnings.

Step 2

Next, we must determine the total net income generated by the business during the month. The net income will typically come from the income statement for the specified accounting period.

Our sample business earned a total of $8000 throughout the month.

Step 3

Next, we must consider the amount of profit to distribute as dividends to our shareholders. A dividend refers to a share of profits and retained earnings that a company pays out to its shareholders and owners.

Step 4

We can find the retained earnings at the end of the month by adding the net income to the retained earnings carried over at the start of the month and deducting the amount allocated for dividends.

In our example, we are left with $6000 in retained earnings after deducting $3000 of our profits for dividends.

Summary

This guide should be everything you need to calculate retained earnings in Google Sheets.

You may make a copy of this example spreadsheet to test it out on your own.