Income Statement to Retained Earnings

The income statement summarizes the revenue and expenses for a given period, resulting in net income (or net loss). This net income figure is crucial because it is then transferred to the statement of retained earnings​.

Statement of Retained Earnings to Balance Sheet

The statement of retained earnings takes the net income from the income statement and adds it to the beginning balance of retained earnings. Any dividends declared during the period are subtracted. The resulting amount, which is the ending retained earnings balance, is carried over to the balance sheet under owners' equity​​.