RETAINED EARNINGS

The term "Owners equity" refers to the claims of the business (share holders) against the assets of the firm. IT consist of two elements :

• Paid up share capital, The iontital amount of funds invested by the share holders.
• Reatained earnings/reserves and surplus representing undistributed profits.

The statements of changes in owners equity simply shows be opening balance of each owners equity account, the reasons for increases and decreases in each , and its ending balance. However in most cases, the only item in owenrs equity account that changes significantly is retained earnings and hence the statement of changes in owners equity becomes merely a statement of retained earnings.

A statement of retained earnings is also known as aprofit and loss appropriation account or income Disposal statement. As name suggest it shows appropriations of earnings. The pravious year balance is forst brought forward. The net profit during the side, appropriations like interm dividend paid, praposed dividend and preference and funds.