At the end of the year, the organization determines the financial result of its activities. The financial result is formed by income and expenses from main activities, reflected in account 91, as well as taxes () and other income and expenses not included in accounts 90 and 91. For example, directly debited to account 99.
At the end of the year, closing entries are made, accounts 90 and 91 are closed, the final financial result is formed on account 99 - a loss is reflected on the debit side, and a profit on the credit side. You can read more about the formation of the final financial result in.
In this article I want to dwell in more detail on what subsequently happens to the resulting profit or loss.
At the end of the year, when all accounts are closed, all postings are made and all transactions are accounted for, the last final posting is made - to reflect the net profit or loss for the year.
The corresponding postings look like:
D99 K84– reflects the amount of net profit for the year.
D84 K99– reflects the amount of loss for the year.
Account 84 “Retained earnings (uncovered loss) is an active-passive account that reflects either the amount of retained earnings or uncovered loss.
Read in more detail about the reflection of profits and losses of an organization in the article: ““.
At the end of the year, at a meeting of company participants, decisions are made on what the retained earnings will be used for or how the resulting loss will be covered. The result of the meeting is its written decision, which stipulates these points. In accordance with this decision, all further entries are made to distribute net profit or cover losses (depending on the financial result of the company’s activities).
What can retained earnings be spent on?
First of all, it must be said that profits can be distributed only once and only based on the decision of the meeting. If there is no solution, then profits cannot be distributed.
It is important that distribution occurs only once a year - at the meeting of participants at the end of the year. If a decision is made not to distribute profit, then it will be reflected on the credit of account 84; in subsequent years it will be considered undistributed profit from previous years and can only be used for reinvestment.
Net profit can be used for:
- Creation of reserve capital (for joint-stock companies, the creation of this capital is mandatory);
- Repayment of losses from previous years;
- Payment of dividends to company participants in accordance with the size of their share (contributions);
- Other purposes (vacations for employees, financial assistance, charity, etc.).
Video lesson “Accounting for retained earnings”: postings, example
Video lesson about accounting in an organization using account 84 “Retained earnings, uncovered loss.” Practical examples with key transactions and typical accounting situations are considered. The lesson is taught by the teacher of the “Accounting and Tax Accounting” website, chief accountant Gandeva N.V. To watch, click on the video below ⇓
Postings for the distribution of net profit at the end of the year (account 84)
Uncovered loss for the year can be covered as follows:
- Due to the account formed on account 83;
- Due to the account formed on account 82;
- Due to additional contributions from company participants.
The consolidated 84 accounting account is intended to summarize data on the final results of the activities of an economic entity, that is, on information about the profit or loss generated during the year. How are closing transactions generated? How to close account 84 at the end of the year in enterprise accounting? Let's look at typical examples.
Characteristics of account 84
Account 84 “Retained earnings” is one of the most important financial accounts of any organization. It is to this account that the final entries from the account are written off. 99, depending on the result obtained for the reporting year - profit (income exceeds costs) or loss (costs exceed income). In addition, from the account 84 money is used to pay income to the founders - both employees of the enterprise and third parties.
84 accounting account allows you to obtain aggregate information about the amount of profit/loss after tax for all types of company activities that have not yet been distributed for various purposes. Analytical accounting is organized in order to monitor the performance of individual commercial areas. At the same time, you can divide the unused profit and the profit already spent on the development of the enterprise, and also see what part of the financial result was formed from the current year’s activities and what part relates to previous periods.
Count 84 – active or passive?
Account 84 “Retained Earnings” is a striking example of active-passive accounts, it is included in Section VII of the Chart of Accounts by order of the Ministry of Finance No. 94n dated October 31, 2000, and is often a significant specific part of the entire capital of the organization. The cumulative method of reflecting data on account 84 (the entries are given below) serves to generate information for the period of operation of the enterprise - from the date of registration to the liquidation of the business.
Thus, the credit balance on account 84 means the net profit of the enterprise, which can be spent on various purposes - from paying income to the founders to investing in business development. And the debit balance on account 84 means an uncovered loss in activity.
84 account in accounting - subaccounts:
- 84.1 – for profits that are subject to distribution.
- 84.2 – for loss subject to coverage.
- 84.3 – for profit in circulation.
- 84.4 – for profits already used.
Account 84 in the balance sheet
After accounting entries have been made for account 84 and other accounts, you can begin to draw up a balance sheet. The final balance of the credit or debit of account 84 is reflected on line 1370 of Accounting. balance sheet as of the reporting date. And the amount of net profit (loss) is entered on page 2400 of the Financial Report. results for the year. The resulting difference will be equal to the amount of profit (loss) for the reporting period.
How to close account 84 using the simplified tax system - postings
The balance sheet reform is carried out by all enterprises, including simplified enterprises, based on the results of the reporting year. In this case, first, subaccounts to the account are closed using internal transactions. 90, and then the final zeroing of accounts is performed - , 91 and 99. The transfer of results is done as follows:
- D 90, 91 K 99 or D 99 K 90, 91 – income accounts are closed.
- D 99 K 84 or D 84 K 99 - an emergency or loss is written off.
Closing account 84 at the end of the year - postings
Monthly postings to the account. 84 are performed to write off the results of the enterprise’s activities. The accountant closes profit/loss like this:
- D 90.9 K 99 or D 99 K 90.9 – profit (or loss) from the main activity is reflected.
- D 99 K 84 – the state of emergency is written off (net profit). Accordingly, the credit 84 of the account shows a profit, and the debit (entry D 84 K 99) shows a loss.
At the end of the year, the balance sheet is reformed, meaning the corresponding accounts are consistently reset to zero. How is account 84 formed when disposing of funds? ? Postings are made depending on the purpose of the write-off:
- D 84 K 75 – money was allocated to accrue annual dividends.
- D 84 K 80 – to increase the authorized capital.
- D 84 K 82 – for the formation of reserve capital.
- D 84.3 K 84.2 – part of the accumulated loss is covered.
Conclusion - we found out that the answer to the question, Kt 84 account - is profit or loss, in any case, means the company’s net profit, which remains after taxation and can be used for the necessary purposes according to Law No. 208-FZ of December 26, 1995. and 14-FZ dated 02/08/98
Account 84 of accounting is an active-passive account “Retained earnings (uncovered loss)”, it belongs to section Ⅶ “Capital” of the chart of accounts and usually makes up a significant part of the organization’s capital. Using standard postings and practical examples, we will consider the specifics of using account 84 and the features of reflecting transactions with retained earnings.
Retained earnings- this is the net profit after tax at the end of the reporting year, received by the organization, but not yet distributed among shareholders in the form of dividends, to replenish capital or to repay uncovered losses.
Account 84 of accounting is used to record the financial results of the enterprise for the entire period of its operation, from the moment of registration to liquidation. The account is replenished during the balance sheet reformation, that is, at the end of the reporting year.
Only the owners of the enterprise can dispose of accumulated profits. The decision on the distribution of income or loss is made by its owners, documented in minutes following the results of the general meeting of shareholders or participants.
Account 84 of accounting is active-passive, therefore, the uncovered loss is reflected in the debit, and the amount of net profit is reflected in the credit of the account.
Subaccounts of account 84 of accounting, which are active-passive, are presented below in the figure:
The allocation of funds to special funds, for example, dividends on preferred shares, corporatization, material incentives for employees, and their expenditure can be reflected in additional subaccounts 84 accounts, but they must be taken into account in the balance sheet in the amount of reserve capital.
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Typical entries for account 84 “Retained earnings (uncovered loss)”
The correspondence of accounts and the main entries for account 84 “Retained earnings (uncovered loss)” are presented in the table:
| Dt | CT | Wiring Description |
| 99 | 84.01 | Reflection of the amount of net profit based on the final turnover for the reporting year (December) |
| 84.01 | 75.02/70 | Reflection of dividend payments (as of the date of decision making) |
| 84.01 | 82/80 | Net profit attributed to reserve capital/authorized capital |
| 80 | 84 | Reflection of the reduction of the authorized capital to the amount of net assets (as of the date of state registration) |
| 84.02 | 99 | Reflection of the amount of loss based on the final turnover for the reporting year (December) |
| 99 | 84.03 | Reflection of the total amount of retained earnings between shareholders |
| 82/75/80 | 84.02 | Reflection of covering the loss at the expense of reserve capital (as of the date of the decision)/own funds of the founders/authorized capital (after state registration of these changes) |
| 84.03 | 84.02 | Covering the loss with the accumulated amount of retained earnings |
| 84.03 | 84.04 | Reflection of the fact of use of retained earnings when creating property |
Examples of transactions with transactions on account 84
Example 1. Payment of dividends and replenishment of the reserve fund
At the end of 2016, JSC Merod received a net profit of 175,300 rubles. At the general meeting of shareholders, it was decided to distribute it to pay dividends (70%) and replenish the reserve fund (10%).
Table of transactions for account 84 - payment of dividends:
Example 2: Loss Coverage
As of January 2017, Fenkh LLC had reserve capital in the amount of 70,000 rubles, and the loss at the end of 2016 amounted to 130,000 rubles. At the general meeting of the company’s participants, it was decided to cover the loss partly with reserve capital, and partly with their own funds in proportion to the share of the participants in the authorized capital:
- Ottis E.A. – 75%, subaccount 75.01;
- Korev A.I. – 25%, subaccount 75.02.
Table of entries for account 84 – Covering losses using own funds and reserve capital:
| Dt | CT | Amount, rub. | Wiring Description | A document base |
| 84.02 | 99 | 130 000 | Reflection of uncovered loss | Income statement |
| 82 | 84.02 | 50 000 | Repayment of part of the loss using reserve capital | Minutes of the general meeting |
| 75.01 | 84 | 60 000 | Reflection of debt Ottis E.A. | Accounting information |
| 75.01 | 84 | 20 000 | Reflection of debt Korev A.I. | |
| 51 | 75 | 80 000 | Reflection of coverage of losses by contributions from owners | Payment order |
In accordance with the Chart of Accounts, accounting for retained earnings or uncovered losses is kept in account 84 “Retained earnings (uncovered losses)”. Three sub-accounts can be opened for it:
84-1 “Profit subject to distribution”
84-2 “Uncovered loss”
84-3 “Retained earnings from previous years.”
Since account 84 reflects the amount of depreciation as a result of the revaluation of fixed assets, the accountant must provide a separate subaccount 84-4 “Revaluation of fixed assets” for these purposes.
Profit distribution
With the final entries of December, the credit balance on account 99 “Profits and losses” is transferred to account 84 “Retained earnings (uncovered loss)”.
The organization's accountant makes the following entry:
DEBIT 99 CREDIT 84 subaccount 1 “Profit to be distributed.”
This amount represents retained earnings for the reporting year. It comes at the disposal of the organization and can be spent in accordance with the decision of the owners. The procedure for using retained earnings based on the results of the previous year is determined at the general meeting of owners.
Contributions to reserve capital
By decision of the general meeting, part of the profit is allocated to reserve capital.
Reserve capital is part of the enterprise's own capital. It is formed from the net profit of the enterprise and has a strictly intended purpose.
In this case, the following entry is made in accounting:
DEBIT 84-1 CREDIT 82 “Reserve capital”
– reflects the amount of reserve capital formed from last year’s profits.
The reserve capital of a joint stock company must be at least 5% of the authorized capital (Clause 1, Article 35 of Law No. 208-FZ). Annual contributions to the reserve fund should not be less than 5% of your net profit. Contributions cease when the reserve fund reaches the amount established by the charter.
Limited liability companies can create reserve capital if this is provided for by the company's charter (Article 30 of Law No. 14-FZ). Thus, if the LLC participants decide to create reserve capital, then there are no restrictions either on the procedure for its formation or on its size.
The funds of the reserve fund have an exclusive purpose. They can be spent:
– to cover the company’s losses; – to repay the company’s bonds in the absence of other funds; – for the repurchase of company shares in the absence of other funds. Reserve capital funds cannot be used for other purposes.
Dividends for the year
The remaining part of the profit is used to pay dividends to the founders and to pay bonuses to the organization’s employees at the end of the year.
The following entries must be made in accounting:
DEBIT 84-1 CREDIT 75 “Settlements with founders” subaccount 2 “Settlements for payment of income”
– the amount of accrued dividends is reflected;
DEBIT 84-1 CREDIT 70
– reflects the amount of the bonus for the organization’s employees. In an LLC, part of the organization's profit intended for distribution among its participants is distributed in proportion to their shares in the authorized capital.
The Law “On Joint Stock Companies” and the Law “On Limited Liability Companies” establish some restrictions on the payment of dividends (see table).
Restrictions on profit distribution and dividend payment
| Type of restriction | Joint-stock companies (Article 43 of Law No. 208-FZ) | Limited liability companies (Article 29 of Law No. 14-FZ) |
| 1 | 2 | 3 |
| JSC has no right to accept | 1. Until full payment of the entire authorized capital | 1. Until full payment of the entire statutory |
| mother's decision (vol. | society. | capital of society. |
| report) about payment | 2. Before the repurchase of all shares that should be | 2. Before payment of actual value |
| dividends on shares | redeemed in accordance with Article 76 of the Law | shares (parts of shares) of a company participant |
| well, but LLC has no right | No. 208-FZ. | in cases provided for by law |
| decide | 3. If on the day such a decision is made the company | No. 14-FZ. |
| about distribution | meets the criteria of insolvency (bankruptcy) | 3. If at the time of making such a decision |
| their profits between | va) or if the indicated signs appear in society | society meets the signs of inconsistency |
| about | va as a result of the payment of dividends. | solvency (bankruptcy) or if these |
| society | 4. If on the day such a decision is made, the value of the company’s net assets is less than its authorized capital, and the reserve fund, and the excess of the liquidation value of the issued preferred shares over the par value determined by the charter, or becomes less than their size as a result of such a decision. 5. In other cases provided for by federal laws. | signs will appear in society as a result of making a decision on the distribution of profits. 4. If at the time of such a decision the value of the company’s net assets is less than its authorized capital and reserve fund or becomes less than their size as a result of such a decision. 5. Other cases provided for by federal laws. |
As for joint-stock companies, Article 43 of Law No. 208-FZ establishes additional restrictions on making decisions on the payment of dividends.
- The first case is when the joint stock company has not made a decision on full payment of dividends on all types of preferred shares, which provide an advantage in the order of receiving dividends over preferred shares of this type. In this situation, the JSC does not have the right to make a decision (announce) on the payment of dividends on preferred shares of a certain type, for which the amount of the dividend is determined by the company’s charter (clause 3 of Article 43 of Law No. 208-FZ).
- The second case is when the joint stock company has not made a decision to pay the full amount of dividends on all types of preferred shares, the amount of dividends for which is determined by the company’s charter. In this situation, the JSC does not have the right to make a decision (announce) on the payment of dividends on ordinary shares and preferred shares, the amount of dividends for which is not determined (clause 2 of Article 43 of Law No. 208-FZ).
In joint-stock companies, the amount of annual dividends cannot be more than recommended by the board of directors (supervisory board) of the company (clause 3 of article 42 of Law No. 208-FZ).
Social expenses
By decision of the general meeting of shareholders (participants), part of the net profit may be used to finance expenses that are not included in expenses for ordinary activities. For example, to pay financial assistance to employees, to purchase gifts for them, or to organize a festive event.
In this case, the amount of net profit that is allocated for these activities should be reflected in account 84 “Retained earnings (uncovered loss)” separately. To do this, you can use additional subaccount 4 “Social expenses”.
In this case, the following entry must be made in accounting:
DEBIT 84-1 CREDIT 84-4
– reflects the amount of net profit, which, by decision of the owners, was used to finance social expenses in 2007.
During the year, expenses for which the owners of the organization have allocated part of the net profit must be financed from this source. For example:
DEBIT 84-4 CREDIT 70
– reflects the amount of financial assistance allocated to an employee of the organization.
DEBIT 84-4 CREDIT 76
– reflects the costs of purchasing gifts for the organization’s employees.
It is possible that the organization will not use the entire amount of net profit allocated by the owners for social expenses over the next period. At the end of the year, the amount of the balance in subaccount 84-4 must be added to the profit to be distributed.
In accounting, this operation is reflected as follows:
DEBIT 84-4 CREDIT 84-1
– the balance of net profit not used during the year for social expenses is written off.
At the general meeting of shareholders (participants) a decision will be made on where the specified amount will be allocated.
Distribution of profits for other purposes
By decision of the general meeting of shareholders, net profit can be used to increase the par value of the JSC shares or to increase the authorized capital of the LLC.
After state registration of changes in the constituent documents, the following entry will be made in accounting:
DEBIT 84-1 CREDIT 80 “Authorized capital”
– the authorized capital is increased due to retained earnings of previous years or the reporting year.
If the general meeting decided to use retained earnings to pay off losses of previous years, the following entry is made in accounting:
DEBIT 84-1 CREDIT 84 subaccount 2 “Uncovered loss”
– net profit is aimed at repaying losses of previous years.
After the use of profit is reflected in the accounting, the balance in the “Profit to be distributed” subaccount of account 84 shows the amount of retained earnings. It can be transferred to the appropriate subaccount:
DEBIT 84-1 CREDIT 84-3
– reflects the amount of retained earnings of the enterprise.
EXAMPLE For approval of the annual meeting of shareholders of JSC Zarya, the annual
financial statements.
Based on the results of work for 2007, JSC Zarya received a profit of 200,000 rubles.
The authorized capital of the company is 400,000 rubles. The amount of reserve capital formed in previous years is equal to 5,000 rubles, that is, it is less than established by law (400,000 rubles ? 5% = 20,000 rubles). Therefore, the general meeting of shareholders, held on March 10, 2008, decided to allocate part of the profit in the amount of 10,000 rubles. (RUB 200,000 ? 5%) to replenish reserve capital.
In addition, the general meeting of shareholders decided to allocate 7,000 rubles to pay off losses from previous years, as well as:
– for the payment of dividends to the founders – 100,000 rubles; – for bonuses to employees at the end of the year – 40,000 rubles; – to hold a corporate party on the occasion of the anniversary of the general director of the organization
tions – 20,000 rub. The remaining amount of net profit is 23,000 rubles. remained undistributed. The following entries were made in the accounting records of Zarya JSC: December 31, 2007
DEBIT 99 CREDIT 84-1
DEBIT 84-1 CREDIT 82
– 10,000 rub. – part of the profit is used to form reserve capital;
DEBIT 84-1 CREDIT 84-2
– 7,000 rub. – the loss of previous years has been repaid;
DEBIT 84-1 CREDIT 75-2
– 100,000 rub. – part of the profit of the reporting year is used to pay dividends to the founders;
DEBIT 84-1 CREDIT 70
– 40,000 rub. – part of the profit is transferred to bonuses for the organization’s employees;
DEBIT 84-1 CREDIT 84-4
– 20,000 rub. – reflects the amount of net profit reserved to finance the costs of holding a corporate party;
DEBIT 84-1 CREDIT 84-3
– 25,000 rub. – the amount of the organization’s net profit that remains undistributed is written off.
Covering losses for the reporting year
If at the end of the year the organization received a loss, then the general meeting of founders decides from what sources it can be covered. Like profit distribution, loss coverage will only be reflected in the accounting records in the next year.
Retained earnings from previous years
The uncovered loss of the reporting year is accounted for in the debit of subaccount 84-2. It can be repaid using retained earnings from previous years, which is included in the credit of subaccount 84-3.
Based on the minutes of the general meeting of shareholders (founders), the following entry must be made in accounting:
DEBIT 84-3 CREDIT 84-2
– the loss of the reporting year was repaid from retained earnings of previous years.
In addition, the loss of the reporting year can be repaid from net profit, which was used to finance social expenses in 2006, but was not fully used. As we have already said, the accountant wrote off the balance of this amount at the end of the year to subaccount 84-1 “Profit subject to distribution.”
If the general meeting of owners decides to use it to pay off the losses of the reporting year, then the entry in the organization’s accounting will be as follows:
DEBIT 84-1 CREDIT 84-2
– the loss of the reporting year was repaid from the net profit of previous years.
Can additional capital be used?
Additional capital is a part of the organization’s equity capital, which shows the common ownership of its participants and is an independent reporting indicator.
Accounting for additional capital is kept on account 83 “Additional capital”. The credit of this account reflects the formation of additional capital, and the debit indicates the use of additional capital.
The sources of formation of additional capital of a commercial organization are the amounts:
– revaluation of fixed assets during revaluation; – share premium; – positive exchange rate difference in case of repayment of debt on contributions to the authorized capital expressed in foreign currency.
As a rule, amounts recorded as the debit of account 83 are not written off. However, in some cases, a reduction in the amount of additional capital is still possible. Such cases are indicated in the Instructions for using the Chart of Accounts. They may be related:
– with a decrease in the value of fixed assets on the date of revaluation, which were previously subject to revaluation; – with the disposal of fixed assets that were overvalued during the revaluation; – with the distribution of additional capital between the founders; – with an increase in the authorized capital of the enterprise. The Instructions do not provide for the use of additional capital to cover losses.
Reduction of authorized capital
The loss received at the end of the reporting year can be repaid by reducing the authorized capital of the organization to the amount of net assets. This is usually done if, at the end of the second and each subsequent financial year, the value of the company's net assets is less than its authorized capital. In this case, the organization is obliged to announce a reduction in its authorized capital to an amount not exceeding the value of its net assets. This provision is established by paragraph 4 of Article 35 of the Law of the Russian Federation No. 208-FZ and paragraph 3 of Article 20 of the Law of the Russian Federation No. 14-FZ.
After the company has decided to reduce its authorized capital, it must:
– notify all known creditors of the company about this;
A joint stock company or limited liability company is given 30 days for this (clause 1, article 30 of RF Law No. 208-FZ, clause 4, article 20 of RF Law No. 14-FZ). Within 30 days from the date of notification to them or from the date of publication of the message about the company’s decision, creditors may, in writing, demand early termination or fulfillment of the relevant obligations of the company and compensation for losses.
After the relevant changes made to the constituent documents undergo state registration, the following entry must be made in accounting:
DEBIT 80 CREDIT 84-2
– the authorized capital is reduced to the amount of net assets.
Use of reserve capital
The company's reserve fund is used to cover its losses in the absence of other funds (Clause 1, Article 35 of Law No. 208-FZ).
In this case, based on the minutes of the general meeting of founders, the following entry is made:
DEBIT 82 “Reserve capital” CREDIT 84-2
– the loss of the reporting year was repaid using reserve capital funds. In addition, the loss may be covered by targeted contributions from the founders, if such a decision is made by the
general meeting of founders. Then the following entry will be made in accounting:
DEBIT 75 subaccount 1 CREDIT 84-2
– the loss of the reporting year was repaid through targeted contributions from the founders.
If there are insufficient sources to cover the loss of the reporting year, then the amount of the uncovered loss will be reflected in the debit of subaccount 84-2.
EXAMPLE For approval of the annual meeting of shareholders of Prometey LLC, a year was submitted
vaya accounting statements. Indicators of the third section of the balance sheet include:
– authorized capital of the company – 10,000 rubles, – additional capital in the form of an increase in the value of property based on revaluation – 3,000 rubles,
– reserve capital formed in accordance with the constituent documents in previous years – 1000 rubles;
– retained earnings from previous years – 4,000 rubles. Based on the results of work for 2006, Prometey LLC received a loss of 6,000 rubles. On March 10, 2007, a general meeting of founders was held, at which the annual
organization report. All retained earnings from previous years were used to pay off losses.
years in the amount of 4,000 rubles, as well as reserve capital in the amount of 1,000 rubles. Thus, a loss of RUB 1,000. remained uncovered. The following entries were made in the accounting records of Prometheus LLC: December 31, 2006.
DEBIT 84-2 CREDIT 99
DEBIT 84-3 CREDIT 84-2
– 4000 rub. – retained earnings from previous years were used to cover the losses of the reporting year;
DEBIT 82 CREDIT 84-2
– 1000 rub. – the loss is covered by reserve capital.
Retained earnings - account84 is used to reflect it as a result of the company’s financial activities. The data in the retained earnings account shows how efficiently the firm has operated since its inception. The article will talk about count 84 and its features.
Account 84 “Retained earnings (uncovered loss)”
The result of a company's commercial activities can be either profit (if income exceeds expenses) or loss (in the opposite situation). To reflect and accumulate data on financial results in accounting, it is customary to use account 84 “Retained earnings (uncovered loss).”
This account contains information about the net total amount accumulated by the company at the end of the relevant reporting period. In other words, account 84 reflects not only the net profit (NP) generated in the current period, but along with it also the retained earnings of previous years (NP) or uncovered loss (UN).
IMPORTANT!The state of emergency for the past year is shown on line 2400 of the financial results report (hereinafter referred to as the report). The balance of NP or NU minus dividends can be seen in line 1370 of the balance sheet.
How the company's state of emergency is calculated, see the article .
The amount of NI for previous years is indicated by the credit turnover of account 84. In circumstances where the company received NI in the current year, the company compensates for it from retained earnings remaining from previous years. If the company did not have NP or NU in previous years, the financial result indicated in line 1370 of the balance sheet (taking into account the payment of dividends) will be equal to the PE from the report.
Read about the nuances of reflecting retained earnings in the balance sheet .
Retained earnings: entries
Operations carried out on account 84 and necessary to account for retained earnings and uncovered losses are carried out at the end of the year. NP is reflected by credit turnover, and NU by debit turnover. In both cases - according to account 84 in correspondence with account 99. In the latter, by the way, the financial result is displayed throughout the year.
In this regard, we recall that the accountant must make closing entries with the following content at the end of each month:
When the year ends and the balance sheet accounts are closed, the ending balance of account 99 should be transferred to the retained earnings account by posting:
|
Operation description |
||
|
The company's emergency is taken into account |
|
The company's loss is taken into account |
As a result of postings at the beginning of the next year, account 99 should be reset to zero. This sequential closing of accounts with writing off retained earnings to account 84 and identifying the result is called balance sheet reformation.
Disposal of retained earnings from previous years
The profit received by the company can be distributed exclusively by order of the owners of the company. This norm is provided for by the laws “On Limited Liability Companies” dated 02/08/1998 No. 14-FZ and “On Joint-Stock Companies” dated 12/26/1995 No. 208-FZ.
But there are also certain distribution frameworks that establish that when an NP is formed at the end of the year, the company is allowed to use it for the following purposes:
- issuance of dividends;
- repayment of previously incurred losses;
- to account 84 to accumulate profits for the purpose of its further use;
- formation of reserve capital;
- increase the authorized capital;
- other purposes established by laws No. 14-FZ and No. 208-FZ.
The direction of NP for the above purposes is accompanied by the corresponding entries in accounting:
In circumstances where the company decides to use retained earnings in account 84 to compensate for losses from previous years, it is necessary to make a posting between internal subaccounts. In other words, do internal wiring.
When a company receives a loss at the end of the year, it is allowed to repay it from the following resources:
- reserve capital;
- NP of previous years;
- authorized capital (after changes in the charter);
- target funds belonging to the founders.
In this case, the following wiring is required:
In addition, the company has the opportunity to significantly reduce the loss incurred in the current period due to retained earnings from previous years. In a company that decides to do this, the accountant will make an internal entry to account 84.
Results
Retained earnings are after-tax earnings that are not used for dividends paid to the founders of the company. The balance sheet reflects the IR for the entire period of the company’s activities.
IR represents a share of a company's equity capital. It can be directed by order of the owners for the purposes provided for by laws No. 14-FZ and No. 208-FZ.
