Understanding retained earnings calculations

To give you a better idea of the overall value of your business, we’ve made a new addition to the Balance Sheet in the form of the Retained Earnings section of the report.

Scrolling to the bottom of your Balance Sheet and clicking on Show Details will reveal a detailed view of the equity section of the report. This breakdown includes two sections: Equity and Retained Earnings.

Retained Earnings refers to all of the profits generated by your business that have not yet been distributed to its owners. It contributes to your business’ total equity and its value comes from the Net Profit section of your Profit & Loss Statement.

The Retained Earnings section is broken down into two sections: Profit for all prior years, and Profit for this financial year.

Profit for all prior years is the accumulated net profit (taken straight from your P&L bottom line) from the first entry in your Wave business until the end of the previous financial year. Profit for this financial year is the accumulated net profit from the first day of the fiscal year to the closing date of the balance sheet.

Between the two amounts, you’ll have the total retained profit for your business.

Because these two amounts are split between the current year and all prior fiscal years, you can track the current year’s retained earnings against previous years' to get an idea of how the value of your business has grown over the course of the financial year.

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