In the process of business operation, losses can be made up not only by after tax profits, but also by surplus reserves. How to make accounting entries when making up losses with surplus reserves?
How to write accounting entries when making up losses with surplus reserves?
1. When an enterprise uses surplus reserves to cover losses:
Debit: surplus reserve
Credit: profit distribution - surplus reserve to cover losses
2. When carrying forward surplus reserve at the end of the year to make up losses:
Debit: profit distribution - surplus reserve to cover losses
Credit: profit distribution - undistributed profit
How to understand surplus reserve?
Surplus reserve refers to all kinds of accumulated funds, and refers to the income accumulation that is formed by the enterprise from the after tax profits, retained within the enterprise, and has a specific purpose. Including statutory surplus reserve, discretionary surplus reserve and statutory public welfare fund.
There are two kinds of general earning points:
First, legal surplus reserve. The statutory surplus reserve of a listed company shall be withdrawn at 10% of its after tax profits. When the accumulated amount of the statutory surplus reserve has reached 50% of the registered capital, it can no longer be withdrawn.
Second, discretionary surplus reserve. Arbitrary surplus reserve is mainly drawn by listed companies according to the resolution of the shareholders' meeting. The difference between statutory surplus reserve and discretionary surplus reserve lies in the basis of their respective provision. The former is withdrawn based on national laws or administrative regulations, while the latter is withdrawn at the company's discretion.
Ways to cover losses
1. The loss of the enterprise can be made up with the profit before tax of the next year. If the profit of the next year is insufficient, it can be made up within 5 years.
2. If the pre tax profits within 5 years are insufficient to cover the losses incurred by the enterprise, the after tax profits shall be used to cover the losses.
3. The losses incurred by an enterprise may be made up by surplus reserve.
Making up losses with pre tax profits or after tax profits does not require special accounting treatment, as long as the after tax profits realized by the enterprise are carried forward from the profit account of the current year to the credit of the profit distribution undistributed profit account, and its credit amount and profit distribution - the debit balance of the undistributed profit account are naturally offset.
What is the accounting entry of using surplus reserve to make up the losses of previous years
1. When an enterprise makes up losses with surplus reserves, it shall make up losses according to the amount of the current period
Debit: surplus reserve - general surplus reserve; Credit: profit distribution - surplus reserve to cover losses.
2. When an enterprise withdraws public welfare fund according to regulations, the amount of public welfare fund shall be
Debit: profit distribution - withdrawal of surplus reserve; Credit: surplus reserve - public welfare fund.
3. When an enterprise withdraws surplus reserve according to regulations, the amount of surplus reserve shall be calculated.
Debit: profit distribution - withdrawal of surplus reserve; Credit: surplus reserve - general surplus reserve.
Extended data
1. Since the statutory public welfare fund and general surplus reserve (including statutory surplus reserve and discretionary surplus reserve) have different purposes, the enterprise shall conduct detailed accounting separately. When an enterprise withdraws surplus reserves, it debits the "profit distribution" title and credits the "surplus reserves" (legal surplus reserves, legal public welfare funds, and discretionary surplus reserves) title.
When an enterprise converts surplus reserve into capital, it shall record the amount of surplus reserve converted into capital in the subsidiary ledger of each owner under the "paid in capital (or share capital)" subject in accordance with the proportion of paid in capital structure before the conversion of capital, and increase the capital investment of each owner in the enterprise accordingly.
2. There are two kinds of general earning points:
(1) Legal surplus reserve. The statutory surplus reserve of a listed company shall be withdrawn at 10% of its after tax profits. When the accumulated amount of the statutory surplus reserve has reached 50% of the registered capital, it can no longer be withdrawn.
(2) Arbitrary surplus reserve. Arbitrary surplus reserve is mainly drawn by listed companies according to the resolution of the shareholders' meeting. The difference between statutory surplus reserve and discretionary surplus reserve lies in the basis of their respective provision.
How to make up loss entries of surplus reserves
Surplus reserves refer to various accumulated funds withdrawn from net profits by enterprises according to regulations. The surplus reserve withdrawn by the enterprise can be used to make up for losses, expand production and operation, and increase capital (or share capital). When an enterprise makes up losses with surplus reserves, the following accounting entries shall be made according to the amount of losses made up in the current period.
Debit: surplus reserve.
Credit: profit distribution - surplus reserve to cover losses.
At the end of the year, surplus reserves are carried forward to cover losses.
Debit: profit distribution - surplus reserve to cover losses.
Credit: profit distribution - undistributed profit.
How to make accounting entries with surplus reserves to cover losses
Surplus reserves make up for losses, which will lead to a decrease in surplus reserves. Surplus reserves belong to the owner's equity account, and the decrease is accounted for as debit. At the same time, the undistributed profit will increase. The undistributed profit is the owner's equity account, and the increase will be included in credit accounting. The accounting treatment of making up losses with surplus reserves is.
Debit: surplus reserve.
Credit: profit distribution - undistributed profit.