Explanation Accounting equation : Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below: Assets = Liabilities + Shareholders Equity Statement of Retained Earnings: Statement of retained earnings shows, the changes in the retained earnings, and the income left in the company after payment of the dividends, for the accounting period. Following is the calculation of net income using statement of retained earnings: Statement of retained earnings Beginning retained earnings $327,000 Add : Net income (1) $242,000 Less : Dividends declared ($75,000) Ending retained earnings $494,000 Table (1) Working note: Calculate the net income: Net income = [ ( Ending balance of retained earnings + Dividends

Financial Accounting, Student Value Edition (12th Edition)

12th Edition

ISBN: 9780134727066

Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

Publisher: PEARSON

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Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The sto…

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Chapter 1, Problem 1.60Q

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The net income for Company P using accounting equation and statement of retained earnings.

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Financial Accounting, Student Value Edition (12th Edition)

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The net income for Company P using accounting equation and statement of retained earnings .

Solution Summary: The author explains accounting equation and statement of retained earnings to determine the net income for Company P.

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The net income for Company P using accounting equation and statement of retained earnings.

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