 In this presentation, we will put together a statement of retained earnings. We're going to have our trial balance on the left side. We're going to focus in on that area that will be different from a corporation to other types of entities, that being the equity section. So we have our trial balance over here. We're going to enter the statement of retained earnings on the right. The trial balance is in order, assets, liabilities, equity, revenue, and then expenses. Depots in green, liabilities in orange, then the equity section in blue, and the revenue and expenses in the darker blue. We have the debit's non-bracketed, the credit's bracketed, or debit's positive numbers for Excel, and credit's negative numbers for Excel. If we add the two up, then debit's minus credits equals zero, or debit's equal credits, that's what this green zero means. The net income is the 500,000 revenue minus expenses at this time. So when we put together the financial statements, remember that this area, of course, is where we're focusing in on because that's what will differ. Now in essence, it's the same accounting equation. Remember that the assets minus liabilities, and obviously we just have a shortened trial balance with not a lot of accounts, just to give an idea of this reconciling system, which I think is really important when we put together the financial statements. So the assets minus liabilities equals 1,368,000. That is equivalent to all the blue stuff, which is all equity, including revenue and expenses, because they have not yet been closed out yet. So that's going to be the 1,368,000 as well. So when we think about the balance sheet, of course, we're just going to have the assets and then the liabilities, and then we've got the equity side. And the equity side is usually going to be supported by some type of equity statement. Now note that the statement of equity is broken out differently than a partnership and a sole proprietor in that the partnership and sole proprietor is broken out by the owners directly, meaning a sole proprietor, capital accounts, or the partner's capital accounts. The corporation, remember, has all the stock is the same. So the only difference between owners in terms of common stock is how much stock is owned. So in other words, it doesn't really matter for the recording of the financial statements who owns the stock. It's all the same. We don't need to name the person that owns it. We just need to note that it's all the same. Now note that we're going to break this out then, not by who owns the stock. We're not going to name the owners. We're going to break it out by the original investment recorded in this case by a common stock and paid in capital versus the amount that has accumulated over time, less the anything that has been distributed in this case in terms of dividends. So if there's no other investment, in other words up here on the common stocks, then it may be sufficient for us to just have basically a statement of retained earnings showing the change, showing the difference in retained earnings. Because remember that this common stock up here represents investments in the company or the issuance of common stock, which may not happen in many types of periods because we may have issued the original offering of stock. And then we're hoping that the company will make money and then we'll have distributions in terms of dividends, not a whole lot of extra stock sales. That's hopefully going to be kind of a norm going forward. So note if there's no other stock sales from the corporation, there will be sales of stocks if it's a publicly traded stock between individuals, stockholders, but not between the corporation issuing new stock. Then all we really need to know is the part of the equity section that has changed from period to period. And that can be done with a statement of retained earnings rather than a whole statement of stockholders equity if there's no activity up here. So the statement of retained earnings, we can just say it's going to be the retained earnings at the beginning of the time period. I'm going to say January 1st, the beginning of the year, we're just going to say 2000X1, the beginning of the year or the end of the prior year. And we'll pick up what that is. Now, when we look at the trial balance, if we still have the net income not yet closed out to the equity section to retained earnings, then this amount here must be the beginning balance. The entire thing, all of this, the 742,000 is the ending balance. Until this is closed out, this then is going to be what we started with. Now there's an exception to that if we recorded the dividends in retained earnings directly. If we recorded the difference, in this case I'm going to break the dividends out so we can see them and then close them out as we would for draws in a sole proprietor or partnership type of entity. So this will be basically our beginning balance. And if we have any questions as to whether there was activity in it during the year and whether that, in other words, was our beginning balance, we can look at the prior year's financial statements and or the general ledger for the entire year to see if there's any activity there. So we're going to use that. That's going to be our beginning. If we want it to be negative, so I'm going to flip the sign by saying negative of that number. So we're going to pull that number and that's going to be our beginning number. Remember that, remember that the statement of retained earnings is really a timing statement. It's going to tell us what happened over time in kind of a summary type format. So what happened over time means we're going to say, hey, this is where we started. That's where we started. Now we're going to say what happened over time in terms of performance of the company. The net book value changed because remember this is kind of where we started in terms of assets minus liabilities, the book value. That's what this is part of the book value, assets minus liabilities. This is the retained earning part rather than the investment part, which didn't change. So we're looking at that piece that changed. This was our beginning earnings. Now we're going to see what happened to it. We're going to add to it, of course, just like we would in the closing process for a super prider or partnership, we're going to say plus the net income. Now the net income is going to be the revenue minus expenses. So it's calculated here, the revenue minus expenses. It's a credit because revenue is a credit and expenses are debits, so the credits are winning. I don't want to represent credits or debits up here, however. We just want to represent the positive numbers for a plus and minus format. So to flip the sign, I'm going to say negative of that number and enter. So note what we've done here. We found a home for this beginning number. I'm just going to make that yellow. We found a home for that and we found a home for all of this because that's basically here. We're looking at the whole equity section, but because these didn't change, we're kind of eliminating that and we're just looking at this section. That's what we want to find a home for. So the only thing that is left then is the dividends. And again, the dividends, remember, might be recorded directly to retained earnings. I'm breaking them out here so we can see them on the trial balance, see them accumulate. Remember that they are temporary accounts going to be closed to retained earnings. And so they're kind of like draws, meaning they're contra-equity accounts, meaning they're going to bring down total equity. So the retained earnings represents, in a way, what is owed to the owners, the stockholders. The dividends represent what has been taken out, therefore reducing retained earnings. So we're going to say less cash dividends declared. All right, spell check that there. So OK. So then we're going to say that this is going to be a reduction. Now we could put the reduction here in terms of a negative number or not. We don't have to. It just depends on the formatting. We said less in the name here. So I'm going to keep it positive. I'm going to say this equals just that number. And then we're going to end with the Indian retained earnings. So I'm going to copy this same thing and right click on it and copy it. Put that here, right click and paste. But then change, because we're not going to January anymore, we're going to go to December. It's the end of the time period. And so it's for the full year, January 1st, where we started to December 31st. And then we're going to do our calculation. We can't sum it up, remember, because it's telling us what we do. What we started with plus the net income, but minus the dividends. So we're going to say it's the 317 plus the 425 minus the 264. That gives us the 478. We're going to do the same thing here. I'll do that with a formula. Equals this number, the 317 plus the 425 minus the 264 and enter. So that's going to be the 478,000 that we'll have there. And so now we found a home for that. So if we highlight that, it's the 478, the credits minus the debits. Here's the 478. So note once again that if we consider the financial statements, if there's no, normally when we see a sole proprietor or a partnership, we have a statement of partnership equity or statement of owner's equity, and we'll show basically the whole owner's equity. Note here though that the balance sheet will break out, you know, this portion in terms of the investment. And then the retained earnings portion will be on the balance sheet as well. If this portion didn't change, if it's the same from year to year, then it is what it is. And all we really need then is to see what the changing component is, what happened over time. If we didn't issue any new stock, that didn't change. And these are the things that did change just as it would for any type of entity, meaning net income increased the equity section increased in this case for a corporation, the retained earnings portion of the equity section, and the distributions to the owners, just like any business, which would normally be called or in other types of entities for a sole proprietor or sole or partnership be called draws. In the case of a corporation, dividends are going to reduce the total retained earnings. So that's going to be the same type of activity. Notice it kind of relates to or similar to the closing process. It's going to be what we started with in retained earnings. And then we'd close out the temporary accounts to it and resulting in the Indian retained earnings. And then we're just going to tack on to it in our statement of owner's equity, the amount that was the investment. That's the other piece, which if it didn't change, then it is what it is. And there's no it's static from, from the entire time period. Now if there is more detail or if we want to give, you know, a full picture of this, then we're going to have to give the full statement of stockholders equity, which can be a bit more complex.