dating services in red deer - Liquidating dividends effect on retained earnings
Dividends can only be paid out of the positive balance of the retained earnings account at the time that payment is to be made.
Due to the nature of double-entry accrual accounting, retained earnings do not represent surplus cash available to a company.
Rather, they represent how the company has managed its profits (i.e.
If the balance of the retained earnings account is negative it may be called accumulated losses, retained losses or accumulated deficit, or similar terminology.
Any part of a credit balance in the account can be capitalised, by the issue of bonus shares, and the balance is available for distribution of dividends to shareholders, and the residue is carried forward into the next period.
whether it has distributed them as dividends or reinvested them in the business).
When reinvested, those retained earnings are reflected as increases to assets (which could include cash) or reductions to liabilities on the balance sheet.
The retained earnings of a corporation is the accumulated net income of the corporation that is retained by the corporation at a particular point of time, such as at the end of the reporting period.
At the end of that period, the net income (or net loss) at that point is transferred from the Profit and Loss Account to the retained earnings account.
When total assets are greater than total liabilities, stockholders have a positive equity (positive book value).
If a company is publicly held, the balance of retained earnings account that is negatively referred to as "accumulated deficit" may appear in the Accountant's Opinion in what is called the "Ongoing Concern" statement located at the end of required SEC financial reporting at the end of each quarter.
Retained earnings are reported in the shareholders' equity section of the corporation's balance sheet.