How Does Retained Earnings Work in FinanceSeer

In order to understand sources and uses of cash (funds flow), FinanceSeer must automate the calculation for Retained Earnings. 

In essence this means that:

Opening RE + Movements in RE + Net Income - Dividends = Closing Retained Earnings

Required Element

Because Retained Earnings represents a unique element to a cash flow model, users must insure that it is properly identified as a Required Element.  Required Elements represent a handful of assignments that the model must know in order for the model to work properly.

A full list of Required Elements can be found on the "Core Accounts" table located in the Accounts Dimension section of Architect.

Opening Retained Earnings

As one would expect, opening RE must always equal the closing RE from the prior period.  However, in the first period of your model, we don't have a closing number to reference.

For this reason, the Opening RE in the first period of the model is always an input.  In fact, its a good idea to enter/load data to all opening balances in the first period.  This allows FinanceSeer to accurately calculate a cash flow in the first period of the model. 

Default Movement for Retained Earnings

Unlike virtually all other balances, FinanceSeer will not allow you to enter either a closing balance or a default movement as this would cause an integrity issue. 

Instead, FinanceSeer forces a closing balance based on the movement schedule for Retained Earnings, where the "default" movement is always equal to the root account on the Income Statement.

Custom Movements

Users are free to use custom movements just like any other balance.  These movements will either increase or decrease the Closing Retained Earnings balance.


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