微觀經(jīng)濟(jì)學(xué)dividends,retainedearningsandincomereporting(完整版)
【正文】 PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 19 RETAINED EARNINGS ? Retained earnings is profit that is retained in the pany ? The balance in retained earnings is part of the shareholders’ claim on the total assets of the pany ? It does not represent a claim against any specific asset PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 20 LO2 RETAINED EARNINGS continued ? A loss for a period is recorded in Retained Earnings by a closing entry in which Retained Earnings is debited and Profit and Loss Summary is credited ? Shareholders’ equity with deficit: PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 21 Statement of Financial Position (partial) Shareholders’ equity Share capital $800 000 Retained earnings (deficit) (50 000) Total shareholders’ equity $750 000 Retained earnings restrictions ? Retained earnings restrictions make a portion of the balance currently unavailable for dividends ? Restrictions have two causes: 1. Contractual –Long term debt contracts may restrict retained earnings as condition for loan 2. Voluntary –Board of Directors may voluntarily restrict retained earnings for specific purposes such as future plant expansion PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 22 Retained earnings restrictions continued Disclosure ? Retained earnings restrictions are disclosed in the notes to the financial statements ? The balance in retained earnings is generally available for dividend declarations – some panies state this fact PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 23 Priorperiod adjustments ? Correction of a material error in reporting ine in a previously issued financial statement is made retrospectively in the first financial statement after discover ? The correction is –made directly to Retained Earnings –reported in the current year’s retained earnings statement as an adjustment of the beginning balance of Retained Earnings PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 24 Priorperiod adjustments continued ? Example of entry to record correction ? Statement presentation of priorperiod errors PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 25 Retained Earnings 300 000 Accumulated Depreciation 300 000 (To adjust for understatement of depreciation in a prior period) Retained Earnings (partial) Balance, 1 January as reported $800 000 Correction for overstatement of profit in prior period (depreciation error) (300 000) Balance, 1 January as adjusted $500 000 Reconciliation of beginning and ending retained earnings ? The retained earnings statement shows changes in retained earnings during the year ? Debits and credits to retained earnings: PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 26 Retained Earnings 1. Loss 1. Profit 2. Prior period error adjustments 2. Prior period error adjustments for overstatement of profit for understatement of profit 3.
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