US GAAP Equity

Retained Earnings

Cumulative net income retained in the business after equity dividend distributions.

Detailed Definition & General Ledger Context

Retained Earnings is governed by US GAAP Equity in general ledger financial reporting and fixed asset sub-ledgers. Maintaining accurate records of Retained Earnings is vital for audit compliance, asset balance verification, and tax schedule reconciliation.

Mathematical Standard & Equation

            Ending Retained Earnings = Beginning Balance + Net Income - Dividends Declared
          

General Ledger Journal Entry Standard

            Debit: General Ledger Expense Account

            Credit: General Ledger Contra-Asset / Payable Liability

Common Operational Pitfalls

Failing to reconcile fixed asset sub-ledgers with the general ledger trial balance monthly.
Conflating IRS MACRS tax depreciation tables with GAAP straight-line financial reporting.
Misclassifying lease obligations under ASC 842 capitalization standards.

Used in these R2R Calculators

Launch Calculator →

Authoritative Source

Source: https://www.fasb.org/ ↗