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1. • CommentAuthorpumpkincake
   • CommentTimeFeb 19th 2007

    
   I am attempting to do the financial statements for our business. I have completed the P&L Statement and am having difficulty with the balance sheet. I understand most of it ( I am not an accountant...) but when I get to the retained earnings...and such I am at a loss as what to do. Can anyone please explain to me in detail where this all comes from?

   Thankful People: kitty2007
2. • CommentAuthorCounter
   • CommentTimeFeb 19th 2007

    
   Retained earnings is the earnings of the corporation from the start of the corporation up to the date of the balance sheet minus any dividends declared from the start of the corporation to the date of the balance sheet. (Sometimes the current year's earnings are on a line line right after the retained earnings. In that case the retained earnings will be the amount up to the start of the current year.)
   You need to add the net income shown on the P&L to the previous retained earnings in order for the balance sheet to balance.

   Thankful People: pumpkincake, onlydragon
3. • CommentAuthorpumpkincake
   • CommentTimeFeb 21st 2007 edited

    
   Thanks Counter...
   
   Here is my dilema. There was no P&L Statement or Balance sheet completed last year. Is it even possible to do this without that? Would it be accurate enough for a bank if I go through last years records and get atleast a general $ amount for the retained earnings/balance sheet? It 's possible I need to turn this over to an accountant...but I would like to try this on my own. So for example my retained earnings for this past year are 40,000. with (3,000) in dividends paid out. Can I consider this my equity even though I do not have any financial statements to use from 05?
   
   Thanks for you help.
4. • CommentAuthorduncanwil
   • CommentTimeMar 8th 2007

    
   Make sure your arithmetic is correct and then the fundamental accounting principe you are looking for is the accounting equation.
   
   Basically the accounting equation is the foundation of all bookkeeping and accounting and says
   
   assets = liabilities + capital
   
   In your case, you can work backwards from what you know, everything that happened this year; and then since your balance sheet will not balance, then the missing figure should be the capital balance brought down from last year.
   
   This assumes that you are working with full and accurate information and your calculations are all correct.
   
   Duncan