Relationship Between Income Statement And Retained Earnings

The balance sheet and the accounting equation.
Relationship between income statement and retained earnings. The statement of retained earnings is affected by any transaction that affects net income and dividends. The net income from the income statement is either retained by the firm or paid out as dividends or a combination of both. Retained earnings will grow by net income in each period. The statement of retained earnings is one of the financial statements that.
Income retained earnings and cash flow statements are related to and based on the accounting equation. The statement starts with the beginning retained earnings 7 500 from the opening balance sheet. It then includes the net income for the year 2 736 from the income statement and deducts the amount of dividend 300 distributed to investors during the year. Retained earnings appear on a company s balance sheet and may also be published as a separate financial statement.
So if net income is 10 in one month retained earnings will grow by 10 that same month.