Formulas

DEA =  LER  (DEALER)

Balance Sheet

• Liabilities + Equity

The Balance Sheet shows the BALANCE between the two sides in double-entry bookkeeping. 

Income Statement

• Revenue - Expenses

Assets

• + Debit

• - Credit

Expenses and Losses

• + Debit

• - Credit

Liabilities & Owner's Equity

• - Debit

• + Credit

Revenue & Income

• - Debit

• + Credit

The retained earnings equation demonstrates how much net income remains after dividends have been paid to shareholders. Understanding this accounting technique can help to expand the company through reinvestment, dividend payments, funding new projects, and even debt repayment. Look at the equation for retained earnings below:

>>  Retained earnings = beginning retained earnings + net income or net loss – cash dividends

This accounting equation comprises the following:

• Retained profits are the total net income earned since the beginning of the business less all cash dividends paid during that time. The balance of beginning retained earnings comes from the previous accounting period's retained earnings. Net income is the remaining amount after deducting expenses from revenues. This formula could also have a negative net outcome. Cash dividends are payments made to shareholders of common stock in cash.

• Businesspeople can conduct a more in-depth financial study by understanding how to calculate retained earnings. They can examine net income after taking dividend payouts into account using the statement of retained earnings. Even if there were no dividends paid out during the accounting period, owners should nevertheless construct the statement of retained earnings.

It's crucial to be aware of your product's production expenses because it demonstrates how effectively you produce your goods. The following information is made possible by using the cost of goods sold formula:

>>  Cost of goods sold = beginning inventory + cost of purchasing new inventory – ending inventory

This accounting equation comprises the following:

The amount of inventory we have on hand at the start of the period is the initial inventory. The cost of new inventory is the sum of money your business must pay to acquire the goods or materials required to produce goods. The product you have left over at the end of the time period is known as ending inventory.

You may figure out how much you spent on producing the products you sold using the cost of goods sold equation. Gross profit can be calculated by deducting the costs of the things sold from the revenues.