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Retained earnings represents the cumulative net income of a company less any dividends. Amounts may be appropriated from retained earnings for contingencies, treasury shares, bond sinking funds, or other purposes as required by law, contracts, or management decisions. These appropriations can later be reversed when no longer needed by crediting the appropriation account and debiting retained earnings.
Retained earnings represents the cumulative net income of a company less any dividends. Amounts may be appropriated from retained earnings for contingencies, treasury shares, bond sinking funds, or other purposes as required by law, contracts, or management decisions. These appropriations can later be reversed when no longer needed by crediting the appropriation account and debiting retained earnings.
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Retained earnings represents the cumulative net income of a company less any dividends. Amounts may be appropriated from retained earnings for contingencies, treasury shares, bond sinking funds, or other purposes as required by law, contracts, or management decisions. These appropriations can later be reversed when no longer needed by crediting the appropriation account and debiting retained earnings.
Copyright:
Attribution Non-Commercial (BY-NC)
Verfügbare Formate
Als PDF, TXT herunterladen oder online auf Scribd lesen
ACCOUNTING FOR RETAINED EARNINGS/ACCUMULATED PROFITS
Retained Earnings Net loss of the period Net income for the period
Appropriation for treasury shares,
Reversal of appropriation contingencies, and etc.
Dividend declaration
Need for Appropriation
1. By law When the company acquires its own shares, the necessary entry to record such appropriation would be:
Retained Earnings
Appropriations for Treasury Shares
2. By contract When there is a need to retain with the business assets needed for the retirement of bonds, the necessary entry would be:
Retained Earnings
Appropriations for Bond Sinking Fund
3. By decision of the Board of Directors When there is a plan for plant expansion, the necessary entry would be:
Retained Earnings
Appropriations for Plant Expansion
Reversal of Appropriations When appropriation is no longer needed such as when treasure shares are sold and plant expansion projects have been completed, the reversal of appropriations must be recorded.