Connecting The Income Disputation As Well As The Residual Sheet

For whatever firm:

"Earning internet income increases retained earnings."

Ofc conversely, negative income decreases retained earnings... diagram:





And in addition to thus to a greater extent than specifically for Bank accounting:

The banking company uppercase tin rate the sack move idea of every bit the mass value of shareholders' equity on a bank's residual sheet. Because many banks revalue their fiscal assets to a greater extent than oftentimes than companies inward other industries that represent fixed assets at a historical cost, shareholders' equity tin rate the sack serve every bit a reasonable proxy for the banking company capital. Typical items featured inward the mass value of shareholders' equity include preferred equity, mutual stock in addition to paid-in capital, retained earnings,...

So negative income at the banking company reduces banking company capital... in addition to volition decrease whatever regulatory ratio of capital:assets...