 The financial statements are prepared directly from the adjusted trial balance. The focus of this short video is the statement of retained earnings. After the income statement, we prepare the statement of retained earnings. This follows the income statement because net income is also included in this statement, as net income increases retained earnings. So let's use the adjusted trial balance and complete the financial statements. We use retained earnings and dividends from the trial balance and put that on the statement of retained earnings. Additionally, we will use net income from the income statement. The statement of retained earnings has a company name, the name of the financial statement, and the date, which is always year-ended and then whatever the date is. The date is done exactly like we do with the income statement. So the statement of retained earnings details the changes in retained earnings of a business for a period or range of time. Retained earnings from the adjusted trial balance is listed first. Then we add net income to increase retained earnings. Finally, we subtract dividends which decrease retained earnings. This gives us an ending retained earnings balance that will go on the balance sheet.