Even the most successful businesses in need of development.In turn, requires the development of specific investment of money, the main source of which is generally profit.Using profits opens wide opportunities to the owners of the enterprise.They are not restricted in terms of recoupment is not obliged to report to the outside investors can independently determine the size of the allocated amount, etc.The only disadvantage of the use of profit is to reduce the amount of dividends, however, taking into account the rise in profits in subsequent periods, the owners of the company are ready to take this step.That is why the account "retained earnings" to accumulate a fairly large amount and the account of retained earnings as accounting and management is an integral part of the company.
By the way, it is calculated quite simply retained earnings.The formula it consists of three main indicators: the net profit for the year, from which must be deducted the dividend paid to shareholders and added retained earnings that have accumulated over the past periods.In the future, we retained earnings may also decline if the funds accumulated in the account, recounting as contributions to the charter fund or extension, as well as various types of reserve funds.
This is the main account of retained earnings.On the basis of the accounting data managers now take a decision on how to deal with the retained earnings accumulated over the year or a few years at the corresponding 84 account.In fact, the use of retained earnings can be carried out in three main areas.
first direction - is, as already mentioned, the payment of dividends.In this case, it credited 75th account in debit with, of course, account 84th.The company may, depending on the agreed dividend policy at any time to allocate the entire retained earnings to the owners and shareholders.However, this is rarely done, because in this case the company loses one of the main sources of funding that may be detrimental to its further development.
second focus is to cover the losses of previous years.In this case, on the 84th account at the beginning of the reporting will be a credit balance and, consequently, after a profit in the current year it will be able to go to the debit.A real opportunity to pay dividends, so, no, but that the company was able to pay off their losses, the shareholders should inspire confidence in its success in subsequent periods.
third direction, by which the account of retained earnings - is the direction of her in various funds, while such accounts shall be credited as 80, 82 and 83. Profit may increase the authorized capital, as well as to be delayed as a reserve in case of revaluationthe company's assets, occurrence of insurance claims, etc.
Finally, the last option to be considered, - it is the accumulation of profits in the 84th run.In this case the profits remain in the company as a source for its assets, which may be new equipment, shares in other companies, cash, etc.In most cases, the company chooses this path.Do not forget that the account of retained earnings at the 84th run, in which it accumulated an impressive amount, is a good sign of financial health of the company and a signal to potential lenders and investors that the company truly stands in the way of development and progress.
