What is retained earnings and general reserve?

Answer 1

Retained Earnings are the accumulated profits and losses of a company over time (less any dividends or distributions to stockholders). At the end of each fiscal year, the income and expense accounts are zeroed out and the net profit or loss for the year is posted to Retained Earnings. So if a company made $10,000 Net Income per year for it's first three years (and paid no dividends), at the end of year three, Retained Earnings would be $30,000.

Answer 2

Reserve Accounts

• Reserves can be capital reserves or revenue reserves, depending on the money sources for the reserves. Capital reserves may relate to the additional premium received from issuing capital and unrealized gains on asset revaluation, whereas revenue reserves are appropriation of retained profit that sets certain amount of money aside for designated uses. Revenue reserves further classify into general reserve and specific reserve. While a specific reserve is only for the purpose specified, the general reserve also has its own defined uses.

Retained Profit

• Companies can create revenue reserve accounts, including general reserve, only when they have sufficient profits in the account of retained earnings. Retained earnings are accumulated profits after any dividend distributions. Since any revenue reserve is an appropriation of retained profit, setting up a revenue reserve account reduces the amount of retained earnings. Therefore, showing revenue reserve accounts in the balance sheet allows users to better gauge a company's future business and investment activities based on the actual level of retained earnings free of any restrictions on their uses.

Read more: The Differences Between General Reserve & Retained Profit | eHow.com http://www.ehow.com/info_8774855_differences-general-reserve-retained-profit.html#ixzz25bDLsGAz