What Are Appropriated Retained Earnings?

Retained income refers to the internal accumulation accumulated by the enterprise from the profits realized in the past years, and includes retained earnings and undistributed profits. The surplus reserve refers to the accumulated funds withdrawn from the net profit by the enterprise in accordance with relevant regulations. The company's surplus reserves include statutory surplus reserves and discretionary surplus reserves. The statutory surplus reserve refers to the surplus reserve that an enterprise withdraws from its net profit in accordance with a prescribed ratio. Arbitrary surplus reserve refers to the surplus reserve withdrawn by a company in accordance with a resolution of a shareholders 'meeting or a shareholders' general meeting. The surplus reserve withdrawn by the enterprise can be used to make up for losses, transfer capital, or issue cash dividends or profits. Undistributed profit refers to the profit that has been accumulated in the company after the net profit realized by the enterprise has been made up after making up losses, withdrawing surplus reserves and distributing profits to investors. Compared with other parts of the owner's equity, the enterprise has greater autonomy in the use of undistributed profits. ^[1]

Basic Information

Chinese name

retained earnings

Foreign name

Retained Earning

Category

Accounting term

Application area

business management

It comes from the net profit realized by the production and operation activities of the enterprise, including the company's surplus reserve and undistributed profits. The surplus reserve is the accumulated surplus for specific purposes, and the undistributed profit is the accumulated surplus for no specified purpose.

Profit distribution refers to the distribution of profits available for distribution by an enterprise in the current year in accordance with relevant state regulations and investor resolutions. The profit available for distribution is distributed in the following order: (1) Withdrawal

Enterprises should set up the "Profit Surplus" account, accounting for changes in the extraction and use of surplus reserves, and set the "Profit surplus" account

(One)

Comparison and Enlightenment of International Retained Income Accounting Models:

The difference between retained earnings and residual earnings:

1. Withdraw surplus reserve. Surplus reserve funds refer to retained net profits for designated purposes. The surplus reserve fund is the accumulated funds drawn from the current net profit of the company, and its withdrawal base is the current year's net profit. The surplus reserve fund is mainly used for the future operation and development of the enterprise. After consideration by investors, it can also be used to increase the share capital (paid-up capital) and make up for operating losses in previous years, but it cannot be used for external profit distribution in subsequent years.

2. Undistributed profits. Undistributed profits refer to retained net profits for unrestricted purposes. Undistributed profit has two meanings: first, this part of the net profit has not been distributed to the company's shareholder investors this year; second, this part of the net profit has not been designated for use, and can be used for the company's future business development and capital increase ( Paid-in capital), make up for operating losses in previous years and profit distribution in subsequent years.

1. No funding costs. Compared with the financing of common stocks, enterprises raise long-term capital from the outside. Retained income financing does not require financing costs, and the capital cost is low.

2. Maintain the control of the company. Use retained earnings to raise funds without issuing new shares or absorbing new investors. The increased equity capital will not change the company's equity structure and will not dilute the control of the original shareholders.

3. Financing is limited. The maximum amount of retained earnings is the sum of the net profit due to the enterprise and the undistributed profits of previous years. Unlike external financing, it can raise a large amount of funds at one time. If the company incurs losses, then no profit will be retained for that year. In addition, shareholders and investors, starting from their own expectations, often hope that companies will distribute a certain amount of profit each year and maintain a certain proportion of profit distribution.