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.
It is cash only if it is appropriated as general reserve. Retained Earnings is a "general term" where the earnings are already used for various activities of the business.
Dr Reserve Cr Retained Earnings
The bookkeeping entry for a revenue reserve is a debit to the retained earnings account and a credit to the revenue reserve account. This entry is made to set aside a portion of the profits as reserves for future use or to cover potential losses. By separating the revenue reserve from retained earnings, it allows for better tracking and management of the reserve funds.
Retained earnings are current year profit and Reserves are allotted the amount from last year profits as reserves.
YES RETAINED EARINING ARE ADDED TO THE EXISTING RESERVE OF THE COMPANY
Retained earnings can become negative, creating a deficit. The retained earnings general ledger account is adjusted every time a journal entry is made to an expense or income account.
Yes, since this account (Retained Earnings) is a credit account and an uppropriate retained earnings account is simply a non-restricted account which is Retained Earnings !!! Even the restricted/ appropriate retained earnings are credited.
Stetement of retained earnings summarizes the changes occured in retained earnings from opening balance to closing balance.
The revenue reserve is the retained earnings which are shown in the company's balance sheet as part of the shareholders' funds and are set aside to use to continue to pay dividends even if the company makes a loss. The example of the revenue reserve are the credit balance of the Profit and Loss Account, General Reserve and etc...
A new business has no retained earnings. Retained earnings are prior years earnings that have not been distributed to the shareholders... if it is a brand new business there is no possible way to have retained earnings at inception date.
normal balance of retained earnings: credit.
retained earnings=profit after tax- dividend distribution