Step through each equity event and watch every column walk from its starting balance to its ending one.
$200,000
$350,000
| Event | Common stock | Paid-in capital | Retained earnings | Treasury stock | Total |
|---|---|---|---|---|---|
| Start ← | $100,000 | $50,000 | $200,000 | ($0) | $350,000 |
| Issue 1,000 shares at $25 | $110,000 | $65,000 | $200,000 | ($0) | $375,000 |
| Declare $1 a share cash dividend | $110,000 | $65,000 | $189,000 | ($0) | $364,000 |
| 10% stock dividend, 1,100 shares at $30 market | $121,000 | $87,000 | $156,000 | ($0) | $364,000 |
| Buy 500 treasury shares at $28 | $121,000 | $87,000 | $156,000 | ($14,000) | $350,000 |
| Reissue 200 treasury shares at $32 | $121,000 | $87,800 | $156,000 | ($8,400) | $356,400 |
| Net income for the year | $121,000 | $87,800 | $216,000 | ($8,400) | $416,400 |
A reconciles every equity account from its beginning balance to its ending one, column by column — common stock, paid-in capital, retained earnings, treasury stock, all in the same table.
Net income is just one row among many. It raises retained earnings the same way any of the year's other equity events raised or lowered their own column.