Why retained earnings matter
Retained earnings show cumulative profit kept inside the business. The balance changes after closing entries because temporary accounts are reset. Revenue and expense accounts close to income summary. Income summary then closes to retained earnings. Dividends close directly to retained earnings. This calculator follows that flow and gives a practical ending balance.
Closing entries in plain terms
Closing entries happen at period end. They move net income or net loss into equity. A profit increases retained earnings. A loss reduces retained earnings. Dividends also reduce retained earnings because they represent distributions to owners. Prior period adjustments can increase or decrease the account. Direct equity corrections may also be needed when errors are found.
What this calculator checks
The calculator accepts revenue, contra revenue, other income, and several expense groups. It supports cost of goods sold, operating expense, depreciation, interest, taxes, and other expense. It also includes cash dividends, stock dividends, appropriations, and adjustments. This allows a detailed review before final statements are issued.
Using the result
The ending retained earnings balance can be compared with the equity section of the balance sheet. It can also support the statement of retained earnings. If the result is negative, the company has an accumulated deficit. That does not always mean failure. It does require review, planning, and clear disclosure.
Review tips
Check each number against the adjusted trial balance. Confirm that revenues and expenses are not already closed. Do not subtract dividends twice. Separate prior period corrections from current year expenses. Keep supporting schedules for tax and audit work. Use the CSV and PDF exports when sharing the calculation with managers, partners, or clients.
Professional notes
This tool is a planning aid. It does not replace accounting judgment. Some entities follow special rules for restrictions, appropriations, comprehensive income, or legal reserves. Public companies may also show accumulated other comprehensive income separately. Always align the final entry with your chart of accounts, reporting framework, and review process.
Common mistakes
Many errors come from mixed signs. Enter deductions as positive numbers in their own fields. The calculator subtracts them where needed. Review closing entries before posting. Save one export with the trial balance. This keeps the audit trail simple and clear.