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Net Income Vs. Retained Earnings: Net income is the profit after all expenses. Retained earnings are what remains after dividends are paid from this net income. Calculating: Use the formula: Beginning Retained Earnings + Net Income Dividends = Retained Earnings.
The key difference between the two is that reserves are a part of retained earnings, but retained earnings are not a part of reserves. Reserves are a part of a companys profits, which have been kept aside to strengthen the business financial position in the future, and fulfil losses (if any).
While these two terms overlap, they are not synonymous. Net income is the amount you have after subtracting costs from revenue. On the other hand, retained earnings are what you have left from net income after paying out dividends. You need to know your net income, also known as net profit, to calculate it.
The net balance (revenue expenses) of this account is then transferred to Retained Earnings through closing entries. If the company made a profit, Retained Earnings account will be credited (increased). If the company incurred a loss, Retained Earnings account will be debited (decreased).
End of Period Retained Earnings At the end of the period, you can calculate your final Retained Earnings balance for the balance sheet by taking the beginning period, adding any net income or net loss, and subtracting any dividends.
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Accumulated profit, also known as retained earnings, is the cash that remains after companies distribute dividends to their shareholders. The value is part of a businesss balance sheet - more specifically, its listed under the shareholders equity division.
Retained earnings are an accumulation of a companys net income and net losses over all the years the business has been operating. Retained earnings make up part of the stockholders equity on the balance sheet. Revenue is the income earned from selling goods or services produced.
Retained profit is a strong indicator of the long-term financial stability of a business. Unlike operating profit, retained profit accounts for money taken out of a business as drawings or dividends.

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