Reformation balance is a procedure, which is conducted annually, especially in large companies and corporations, by the decision of the Board of Directors.Its purpose is to set the final financial result for the past year.This is done by comparing the figures obtained revenue and profit, and data on the use of funds.
Reformation balance - a process that can be carried out only in the case of a permit or an order of the authorized person.As a rule, the Board of Directors, convened annually by the general voting claims representative or investors solve problems directly at the meeting.
Reformation balance: posting
So, first of all should be familiar with accounting entries drawn up by a specialist company.Of particular interest is the 80 account titled "Profits and losses" as it concentrated amounts reflect the flow of funds and their direction on particular needs.Accordingly, the credit side of the marked loss of financial resources, and debit - inflows by sources.It becomes clear that the company's position at the balance sheet date depends on the balance of the account.
Once it was decided that the reformation of the balance to be carried out, an accountant based on the desires and requirements of the management team carries out the distribution of profits.Most of the owners is, it is divided into shares in proportion to the contributions of investors.If at the end of the operation a surplus, it refers to a special 88 bill, which was awarded the telling title "Retained earnings from previous years."Further, this amount is partially sent to the reserve account for unforeseen expenses.
Currently, not all businesses believe that the balance of the Reformation was an important and necessary element in the accounting practice.However, this procedure really helps the executive staff demonstrate to investors and owners, how much money they receive from the operation of the company and where other resources are distributed.In this regard it can be concluded that the Reformation is a very effective mechanism, it is still valid at all times.
In this area there are also disadvantages and difficulties.The procedure itself is not a highly complex scheme requires an investment of time and effort.Often problems arise from illiterate bookkeeping.Often the "stumbling block" are mistakes made at the time of closing of the accounts, and summarizing.In order to avoid such significant errors, companies should pay particular attention to audit financial records.Quality and timely verification will enhance not only the productivity but also the degree of confidence of the inspection services.
Please finally approve the annual financial statements, then the balance may be the reformation, during which reverses profits last reporting period and the closure of other accounts.Unobligated balance of the account will cover the losses of previous years.The economic meaning of this procedure is a slight improvement of the balance sheet.In the future, this document will be easier to work with, since all the posting undertaken and the account closed.
legal person is entitled to choose a particular way of carrying out the Reformation, after noting the method of documents.In addition, this process requires less precision and literacy from a specialist, as well as third-party audit organizations carefully check the balance formatted.
