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25 May, 22:25

Which financial statement is used by most corporations instead of the retained earnings statement?

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  1. 26 May, 00:41
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    The statement that is mostly used instead of retained earnings statement is the statement of stockholder's equity.

    Explanation:

    The retained earnings statement is a financial statement used to show the amount of retained earnings during a specific period. It is also known as the statement of stockholder's equity. It is used to reconcile the retained earnings at the beginning and at the end of an accounting period. The retained earnings are usually compared at different accounting periods to determine how profits were utilized.

    The shareholder's equity is often of importance to shareholders in a company since it tends to show how their profits is being used. If the shareholder's equity keeps increasing at different accounting periods, then the company is doing well and the shareholders are happy. The shareholder's equity is the economic value that remains after all the company's assets and liabilities have been liquidated. The shareholder's equity can be determined using the accounting equation as shown;

    A=L+E

    where;

    A=Assets

    L=Liabilities

    E=shareholder's equity

    and;

    E=L-A

    This can then be written as;

    Shareholder's equity=Liabilities-Assets
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