Payment of dividends from retained earnings of previous years: is it possible to do this, payment procedure

Is it true that retained earnings are net profits?

Retained earnings are truly net profits that (as the name suggests) were not distributed (divided) among the participants/shareholders of the company.
Net profit is considered to be that part of income from sales and non-sales operations that remains after paying taxes. The decision on how to distribute this income rests solely with the owners. Traditionally, the issue of retained earnings is put on the agenda of the annual meeting of the company's owners. The adopted decision is documented in minutes, which are drawn up following the results of the general meeting of participants/shareholders.

For information on how such a document is drawn up, read the article “Decision on payment of dividends to an LLC - sample and order.”

The main ways of spending retained earnings are considered to be in the following directions:

• to pay dividends to participants/shareholders;
• repayment of past losses;
• replenishment (creation) of reserve capital;
• other goals formulated by the owners.

For information about the accounting entries accompanying the accrual, payment and receipt of dividends, read the material “Accounting entries for the payment of dividends”.

What are dividends and their source?

In simple terms, dividends are the profit of an organization, which is distributed in certain shares among shareholders after the results of the company's work are known.
The shareholder receives an accrual for each securities he owns. Accordingly, the larger the stake in the company, the higher the income received. Dividends are paid from the organization's net profit to owners of both preferred and ordinary shares.

In the case of the former, the income will be fixed, that is, determined initially, and in the case of ordinary ones, it will be floating. After all, the investor receives a set percentage, which means that the greater the company’s profit, the greater his own income.

Is retained earnings an asset or a liability?

Retained earnings on the balance sheet are, of course, a liability. The value of this indicator indicates the company’s actual debt to its owners, since ideally this profit should be distributed among the participants and invested in the further development of the business.

In fact, the company cannot dispose of retained earnings without the owners making a decision. The loss reflected in line 1370 is also on the passive side of the balance sheet, only this is a negative value, so the number is placed in parentheses.

“How to read a balance sheet (a practical example)?” will help you better understand balance sheet analysis. .

Retained earnings must be reflected on the balance sheet. ConsultantPlus experts explained in detail how to do this correctly. To do everything right, get trial access to the system and go to the Tax Guide. It's free.

Retained earnings and uncovered losses - what are they?

As mentioned above, retained earnings are the final income received by the company from its business activities, remaining after the transfer of income taxes and not yet divided (not directed to other purposes) by its owners.

Example 1

Voskhod LLC in 20XX received a profit in the amount of 800,000 rubles and paid income tax in the amount of 160,000 rubles. In line 1370 in the balance sheet liability for the year 20XX, Voskhod LLC should reflect 640,000 rubles. This is retained earnings.

The value in line 1370 of the balance sheet may be equal to that indicated in line 2400 of the financial results report if the company had no profits not distributed by the owners at the beginning of the year and no interim dividends were paid during the year.

What can retained earnings from previous years be used for? The answer to this question is in ConsultantPlus. If you do not have access to the K+ system, get a trial online access for free.

Our article “Deciphering the lines of the balance sheet (1230, etc.)” .

As for the uncovered loss, this is the excess of the company's expenses over income at the end of the year.

Example 2

In 20XX, Parus-Trade LLC received revenue from the provision of services and other non-operating income. Their total amount was 400,000 rubles.

The costs associated with conducting the main activity (transportation) are equal to 380,000 rubles. Other company expenses (not taken into account for tax purposes) amounted to another 58,000 rubles. Profit tax was assessed in the amount of RUB 4,000. Parus-Trade LLC has no reserve capital.

This means that at the end of 20XX, after the reformation of the balance sheet, an entry of 42,000 rubles will appear in line 1370 in parentheses. (400,000 – 380,000 – 4,000 – 58,000).

An uncovered loss occurs when the company receives an actual loss and there are no financing reserves. The value entered in the liability side of the balance sheet in parentheses will reduce the total for section 3 of the balance sheet.

Among the main reasons for receiving an uncovered loss are:

• obtaining an actual negative financial result from the company’s activities due to the excess of costs over income;
• changes in accounting policies that had an impact on the financial condition of the company (this is directly stated in paragraph 16 of PBU 1/2008, approved by order of the Ministry of Finance of Russia dated October 6, 2008 No. 106n);
• errors found in the current year, made in previous years, which affected the financial result (subclause 1, clause 9 of PBU 22/2010, approved by order of the Ministry of Finance of Russia dated June 28, 2010 No. 63n).

Read more about PBU 1/2008 in the material “ PBU 1/2008 “Accounting policies of the organization” (nuances)” .

While dividends affect shareholders' tax liability, they generally do not change the taxes the company itself must pay.
Corporate income tax must be paid regardless of whether the company distributes its profits or leaves them undistributed. However, there is one exception. If the Internal Revenue Service can prove that earnings are not distributed for the sole purpose of avoiding any dividend taxes, it may impose an additional tax on undistributed earnings. However, publicly traded companies can almost always justify their retained earnings to the Internal Revenue Service. [p.419] According to the public organization Tax Foundation, the average citizen in rich America must work 124 days a year in order to pay all federal and local taxes. In other words, during a standard 8-hour day, he works 2 hours and 43 minutes for taxes. TAX ON RETAINED PROFIT - taxation of the part of the profit of joint-stock companies, insurance companies, banks and other organizations recognized as separate taxpayers, not distributed as dividends, when levying corporate income tax. A number of countries allow the extension of the corporate income tax regime to enterprises of individual owners (at the request of the latter). This ensures that profits are deferred (before they are distributed) with income tax, the rates of which are progressive, while corporate income tax generally applies proportional rates. [p.146] One of the serious analytical problems is the issue of the creation of reserves by companies to pay deferred income taxes on undistributed profits received by foreign branches. [p.292]

Some companies do not set aside reserves to pay income taxes on undistributed earnings earned by foreign subsidiaries because the company does not intend to repatriate the earnings and anticipates that those taxes will never be paid. If this is the case, the question arises whether it is worth showing this profit in the reports at all if it will never go to domestic shareholders [p.292]

TAX ON RETAINED PROFIT - is imposed on the undistributed (not allocated for dividends) part of the profit of joint-stock companies, insurance companies, banks and other taxpayer organizations paying dividends. Complements the more general corporate income tax. [p.192]

RETAINED EARNINGS TAX - an addition to the corporate income tax - the assessment of the portion of the profits of joint-stock companies, insurance companies, banks and other organizations recognized as separate taxpayers when levying corporate income taxes that are not distributed as dividends. Due to this, a deferment of income taxation (before its distribution) is ensured. Taxation of redistributed profits is carried out either in the form of additional taxes or in the form of a discount when taxing the distributed part of the profit. [p.419]

TAX ON RETAINED PROFIT [p.211]

TAX ON RETAINED PROFIT - taxation of the part of the profit of joint-stock companies (organizations) not distributed as dividends, recognized as individual taxpayers, when levying corporate tax. [p.211]

RETAINED PROFIT TAX - a tax levied on that part of the profits of joint-stock companies, insurance companies, banks and other organizations that are not distributed as dividends, and these organizations must be recognized as separate taxpayers. [p.399]

A number of countries allow the extension of the corporate income tax regime to enterprises of individual owners (at the request of the latter). This ensures that profits are deferred (prior to their distribution) with income tax, the rates of which are progressive, while corporate income taxes generally apply proportional rates. Taxation is carried out either in the form of additional taxes on undistributed profits, or, conversely, in the form of discounts when taxing the distributed part of profits. [p.399]

Tax on retained earnings 399, 688 [p.795]

Tax on retained earnings 394 [p.901]

Differential taxation of retained corporate earnings and dividends paid to shareholders changes their ratio in earnings. Reducing rates on the first part of it while high taxation of the second increases the possibilities of self-financing, and in the long term even leads to changes in the composition of the real owners of the company. If taxes are raised on a corporation's retained earnings and lower on dividends, the opposite is true. High taxation of labor costs makes it profitable to increase the capital intensity of production, while the increase in taxes on the property of enterprises pushes business entities to lower the technical composition of capital.. [p.57]

Let's pay attention to retained earnings (part of net profit). This is a fairly expensive source. In conditions when the interest on the loan is lower than the income tax rate, retained earnings become one of the most expensive sources and approach the level of the cost of ordinary shares. [p.247]

Options granted for a specified number of years or with the right to early repurchase are recorded at intrinsic value at the time of grant and accordingly affect retained earnings, while for tax purposes they are measured at intrinsic value at the time of exercise (which is generally , higher if the stock price rises). At the same time, they allow you to defer payment of income taxes until the option exercise date. [p.392]

The amount of the revaluation of fixed assets credited to capital can be included directly in the company's retained earnings when the asset ceases to be used or disposed of. At the same time, it is allowed to partially attribute the amount of revaluation included in capital to retained earnings and in the process of using the facility by the company. In this case, the amount of revaluation, which can be attributed to retained earnings, is calculated as the difference between the amount of depreciation of the object, calculated on the basis of the revalued value, and the amount of depreciation, calculated on the basis of its original cost. The rules for accounting for the impact of the results of revaluation of fixed assets on the amount of income tax are regulated by IFRS 12 Income Taxes. [p.67]

One of the most important functions is related to taxes. Since a company's retained earnings serve as its largest source of funding, it follows that being smart with taxes creates an additional source of funding. The emergence of a huge number of organizations doing business on the territory of various administrative entities increases the complexity and importance of the GFD in its role as a tax manager. This is especially true for GFDs of multinational companies. [p.481]

External debt that a segment has incurred in connection with the production and sale of products (works, services) is considered by PBU 12/2000 as a segment liability. Indeed, some types of current liabilities (for example, accounts payable) are easily identified with the activities of a specific division. For example, the payment of interest on long-term loans and borrowings raised in the interests of the development of the company as a whole is not identified with the activities of segments. The segment's liabilities do not include income tax debt to the budget. In practice, such obligations remain unallocated (Table 7.4). [p.371]

After paying income taxes, the organization retains profit from ordinary activities. In the event of extraordinary expenses and income, this profit is adjusted by the difference between extraordinary income and expenses. As a result, net (retained) profit of the reporting period is formed, at the expense of which dividends are paid on ordinary and preferred shares. The amount of profit remaining at the disposal of a commercial organization is reflected in line 190 f. 2 financial statements. The procedure for generating the organization's profit is shown in Fig. 46. ​​[p.204]

The amount remaining after paying income tax is the organization's profit from ordinary activities. If the organization has extraordinary income or expenses, then they are summed up with ordinary profit and form net profit (retained profit of the reporting period). [p.221]

At the next stage, it is necessary to determine the price of retained earnings, which is understood as the part of the organization’s profit remaining after deduction of taxes, payment of interest due on borrowed funds and dividend expenses on preferred shares. The owners and administration of a commercial organization are faced with a dilemma: to direct funds for consumption - payment of dividends, income on share deposits, etc. - or to use retained earnings as a means of financing the company's activities. [p.205]

The final financial result of the organization’s activities is net (retained) profit (P), which is formed on the account. 99 Profits and losses as Profit (loss) from sales (plus, minus) Balance of income and expenses from operating and non-operating activities (plus, minus) Balance of extraordinary income and expenses minus Income tax. [p.284]

Thus, the final financial result of the activities of a commercial organization of any organizational and legal form of business is expressed by the so-called accounting profit (loss), identified for the reporting period on the basis of accounting of all its business transactions and assessment of balance sheet items according to the rules adopted in accordance with the Regulations on maintaining accounting records and financial statements, approved by order of the Ministry of Finance of the Russian Federation dated July 29, 1998 No. 34 no. According to this Regulation, the final financial result of the reporting period is now reflected in the balance sheet as retained earnings (uncovered loss), i.e. the final financial result identified for the reporting period, minus taxes and other similar mandatory payments due from profits established in accordance with the legislation of the Russian Federation, including sanctions for non-compliance with tax rules. [p.285]

Income tax Net profit (retained profit (loss)) of the reporting period [p.437]

Profit is an intermediate indicator of income. Produced income is added value, as a rule, a positive value. Profit, taxes on production, wages, interest on loans, rent are components of added value. After paying the second stage of taxes from the profit - on property and income - the remainder of the profit is formed - net profit. Net profit is distributed, by decision of the shareholders, into dividends payable, into investments and into the undistributed balance of profits, which, together with the balances of profits from previous years, forms the enterprise’s own source of financing the working capital. [p.43]

Profit (loss) from sales 900,760 Income from participation in other organizations 5 9 Profit (loss) from financial and economic activities 905,769 Other non-operating income 9 47 Other non-operating expenses 42 45 Profit (loss) 872,771 Income tax 288,254 Diverted funds 37 38 Retained earnings (loss) 547 479 [p.305]

Retained earnings (in accounting it is called the net profit of the reporting year) represents that part of the balance sheet profit that, after using the latter in the reporting year to pay taxes and other payments to the budget, remains at the disposal of the organization and is used in the following year to stimulate employees and financing costs for the creation of new property, acquisition of fixed assets, accumulation of working capital, payment of dividends to shareholders, acquisition of shares, bonds and other securities of other organizations, for charitable purposes, current expenses for the maintenance of socio-cultural and housing and communal services, etc. .P. At the expense of retained earnings, payments are also made on the bank's principal debt and payment of bank interest in excess of the rates established by law, payment of bank interest on loans received for the purchase of fixed assets and intangible assets, as well as on overdue and deferred loans. [p.256]

Retained earnings (in accounting it is called the profit of the reporting year in net amount) - represents that part of the balance sheet profit that, after using the latter in the reporting year to pay taxes and other payments to the budget, remains at the disposal of the organization and is used in the following reporting year to stimulate interest of employees in the results of labor and financing the costs of creating new property, acquiring fixed assets, accumulating working capital, paying dividends to shareholders, purchasing shares, bonds and other securities of other organizations, for charitable purposes, current expenses for maintaining social, cultural and housing facilities -municipal services, etc. [p.734]

This line during the reporting year shows the retained earnings of the reporting period in a net amount, calculated as the difference between the financial result for the reporting period identified on the basis of the accounting of all operations and the assessment of accounting items in accordance with the Regulations on Accounting and Financial Reporting in the Russian Federation and the amount of taxes and other similar obligatory payments due from profits in accordance with the law. [p.105]

Indifference set 138 Least efficient scale 138 Overhead costs 138 Taxes 138 Ad valorem tax 139 Value added tax 139 Personal property tax 141 Tax paid by citizens (income tax) 42 Tax on retained earnings 146 Corporate income tax 146 Hidden tax 147 Tax declaration 147 Tax law 147 Tax regulation 147 Tax benefits 147 National currency 147 National income 147 Real estate 147 Risk neutrality 147 Non-profit organizations 148 Neoprotectionism 148 Non-production costs 148 No government balance 148 Penalty 148 [p.295]

Example. In 1984, Ameri an Express sold its Canadian subsidiary and other assets for $42 million. The company also reported $42 million related to this. tax costs on retained earnings for which no accruals were previously made. This voluntary decision by the company reminds everyone that it is not always possible to conduct a transaction in a tax-avoiding manner, and that past decisions not to distribute foreign earnings are sometimes reconsidered. [p.292]

According to [il, i6], the cost structure of Eazprom OJSC for gas production in 2001 was as follows: material costs (without depreciation) 47%, depreciation of fixed assets 5%, social contributions 5.2%, wages 13.9%, other costs 28.9%. Revenue from gas sales amounted to 588.5 billion rubles, and expenses - 368.6 billion rubles, so Eazprom's gross profit was 219.9 billion rubles. After paying all taxes, net (retained) profit from the sale of gas as of December 31, 2001 amounted to 100.3 billion rubles. [p.49]

The usual distribution of the profit achieved during the reporting period. .- were (losses) after taxes. Profits are distributed. for the payment of dividends to shareholders, interest payable to creditors and for retained earnings used for reinvestment of production. It is clear from the diagram that the funds spent on the payment of dividends and interest payable fall out of our system. [p.26]

The profit of the company is determined in accordance with the generally established procedure. Distribution of profits in a limited liability company is carried out in accordance with the law. First of all, income tax and other payments to the budget are paid from profits. Further, the profit is distributed in accordance with the procedure established in the company's charter for production and social development. The remaining part of the profit is distributed among the company's participants in proportion to their share in the authorized capital, unless otherwise specified in the constituent documents. If the charter does not stipulate the procedure for distributing profits remaining at the disposal of the company, the decision on its distribution must be made annually by a meeting of the founders. Retained earnings from previous years serve as a source for the formation of reserve capital. [p.359]

How retained earnings from previous years are displayed

Retained earnings from previous years are accumulated in account 84. The credit balance of this account is transferred to balance sheet line 1370.

Typically, there should be no movement in the debit of the account during the year, since the distribution of profits traditionally occurs at the end of the year after the annual meeting of the company's owners. But there is also a special case when debit 84 needs to be used during the year. To make sure that you did not miss this very transaction, get free access to ConsultantPlus and go to the Typical Situation.

For information on how data on retained earnings is generated for reflection in the balance sheet (final and interim), read the article “Procedure for compiling a balance sheet (example).”

Reasons for payment

Several rules have been defined on which the calculation of dividends depends:

1. The company has a net profit (logically, without it there are no funds to pay).
2. The owners must collectively and unanimously decide that profits will be distributed among shareholders and document this.
3. All actions and operations must be within the legal framework and comply with Article 29 of Law No. 14-FZ of 02/08/1998.

In what cases should dividends not be paid?

The Law “On Limited Liability Companies” establishes cases when it is prohibited to distribute profits among owners.

These include:

• non-payment of authorized capital;
• funds have not been paid to repay the participant’s share upon his/her withdrawal;
• the decision made on the distribution of profits will lead to bankruptcy of the company;
• the amount of equity capital and borrowed capital (for a long term) is less than the authorized and reserve capital;
• the company has an uncovered loss.

Retained earnings of the reporting year

The credit balance at the end of the year according to accounting account 99 is net profit. But in addition to the financial result, this account also reflects some other indicators. You can learn which ones and how not to make mistakes when making transactions from the Typical Situation from K+, having received trial access to the system.

When reforming the balance sheet, it is written off to accounting account 84 (Dt 99 Kt 84) and constitutes retained earnings at the end of the reporting year.

Read about the reformation procedure in the material “How and when to reform the balance sheet?”.

In order to separate the indicators of retained earnings of the current (reporting) year from last year’s, some accountants allocate separate lines 1372 and 1372 in the balance sheet, which respectively reflect the retained earnings of the reporting period and previous years.

The use of retained earnings is the prerogative of the company's owners. And highlighting this financial indicator for different years in the balance sheet is primarily convenient for them. But it is worth keeping in mind that the retained earnings of the past year cannot be fully distributed without taking into account the company’s previous operating results.

IMPORTANT! It must not be allowed that the value of the company’s net assets, after transferring retained earnings of the reporting year for the payment of dividends, becomes less than the size of the company’s authorized capital even if there is a reserve fund. The caution applies to cases where uncovered losses were recorded in previous years. The decision to cover last year's losses from retained earnings of the reporting year is made exclusively by the owners of the company.

But retained earnings for previous years can be distributed by the participants/shareholders of the company not only at the end of the year, but at any time. The main thing is to hold a thematic meeting of all company owners and approve the appropriate decision.

Does an LLC have the right to make incentive payments to employees from retained earnings and how to formalize this, and are they taken into account when calculating the average salary? The answer to this question was prepared by labor inspector in the Nizhny Novgorod region V.I. Neklyudov. Get free trial access to the ConsultantPlus system and get acquainted with the official’s point of view.

What dividends can there be?

For convenience, we have collected all the information in a table:

In what cases can a company not pay dividends?

According to the Law “On Joint Stock Companies”, declared dividends on shares cannot be paid in the following cases:

• the company has signs of bankruptcy;
• the company will go bankrupt when paying these dividends;
• the value of the company's net assets is less than the sum of its authorized capital and reserve fund;
• the value of the company's net assets will become less than the above amount as a result of the payment of dividends.

In fact, all this can be boiled down to one thing - dividends are not paid in the case where the payment will lead to serious consequences for the organization or an increase in the risks of such consequences.

Retained earnings: calculation formula

According to general accounting data, retained earnings are a company's net profit after taxes that can be distributed to the company's owners.

Based on global financial practice, retained earnings (hereinafter referred to as RR) are calculated using the following formula:

NPk = NPn + PE – Div,

Where:

NPk - NP at the end of the reporting year;

NPn - NP at the beginning of the reporting period;

PE - net profit remaining after accrual of income tax;

Div - dividends paid in the reporting year based on the NP of previous years.

If you do not have the NP value, then to calculate the NP you can use the following scheme:

• first calculate profit before tax (to determine it, calculate operating profit, which is defined as the difference between operating income and operating expenses);
• then subtract depreciation and interest costs from operating profit;
• Subtract tax from the resulting profit value.

To find out whether it is possible to see the amount of operating profit in the accounting statements, read the article “Which line is operating profit reflected in the balance sheet?”

Betting, odds, formula

The reinvestment process is associated with the following key concepts:

1. Reinvestment rate. Shows the percentage value that will be applied to the amount of invested funds when calculating income. The higher the rate, the greater the investor's profit.
2. Reinvestment rate. Reflects the share of net profit that was allocated to a new investment round after receiving dividends. The indicator is calculated by dividing the value of reinvested funds by the amount of net profit.

When reinvesting interest, the term compound interest is used. Such interest rates are calculated using the formula:

SUM = X * (1 + %) n , where:

• SUM – total sum of calculations;
• X – initial investment amount;
• % - the value of the interest rate for the selected deposit program, calculated in annual percentages;
• n – number of years in the period (or months, quarters, weeks, years).

The formula for determining the rate on interest deposits with capitalization looks like this:

Rate = p * d / y , where:

• p – deposit interest rate, calculated as annual percentage/100;
• d – the period following which the capitalization of funds begins, expressed in days;
• y – calendar year, presented in days (365 or 366 days).

Example of compound interest calculation

When investing funds on a deposit with compound interest in the amount of 78,000 rubles at an annual interest rate of 7%, the following final profitability indicators will be:

1. At the end of 1 year, the deposit account will have an amount of 83,460 rubles. (78,000+78,000*7%). The profit will be 5,460 rubles. (83,460-78,000).
2. If the funds are reinvested for another year, then at the end of the second year the amount of 89,302.20 rubles will be accumulated in the account. (83,460+83,460*7%). Profit for the year will be 5,842.20 rubles. (89,302.20-83,460).
3. If you continue to reinvest the funds, then at the end of the third year the amount in the account will be 95,553.35 rubles. (89,302.20+89,302.20*7%). Profit for the third year is 6251.15 rubles. (95,553.35-89,302.20).

NOTE! When implementing reinvestment measures, it is necessary to analyze the meaning of the reinvestment rate.

The reinvestment rate reflects the bar within which you can continue to effectively invest in the second round. It characterizes the profitability of the project.

When reinvesting profits by legal entities in their own enterprises, the reinvestment coefficient helps to assess the degree of profitability of the project and the effectiveness of the current resource allocation policy. With a high coefficient, they indicate a significant return of profit into the assets of the enterprise in the form of reinvestment to update equipment, modernize production and increase the productivity of technologies and increase the intensity of sales activities.

IMPORTANT! It is necessary to reinvest profits into the enterprise in order to strengthen market positions and increase sales levels. Pursuing other goals will ultimately result in a decrease in overall profitability.

Formula for calculating the reinvestment rate:

Coefficient = (Reserve capital at the end of the year + Retained profit or uncovered loss at the end of the year – Reserve capital at the beginning of the year – Retained profit or uncovered loss at the beginning of the year) / Profit (net) or loss * 100%

If a coefficient value is below zero, we can talk about serious financial problems of the enterprise and the ineffectiveness of the investment project. An indicator equal to zero indicates that there is no reinvestment; all profits are used to pay dividends. If you want to change the situation, you need to review the organization's dividend policy.

If the coefficient according to the calculation results turns out to be close to 100%, then most of the profit received is put into circulation through reinvestment. In dynamics, a stable increase in the reinvestment ratio indicates that investors and founders of the enterprise consider this project interesting and promising.

Indicators for investors

When analyzing the financial condition of a company, investors pay attention to the use of retained earnings. If NP accumulates and is not put into circulation, this state of affairs should seem to suit investors, since they can count on significant dividends.

However, without investment in its activities, the company stops growing, and its income not only does not increase, but may also decrease (due to a drop in competitiveness, high wear and tear of equipment, and for other reasons related to the lack of investment). So a company that accumulates profits but does not invest in its activities cannot be attractive.

At the same time, a company that does not make a profit and does not pay dividends cannot interest investors at all.

The ideal option for investors is a company that invests the funds remaining after paying dividends in its development. Although the owners may decide not to pay dividends and direct the entire volume of NP into circulation.

Distribution of profit of an individual entrepreneur

Are you planning to organize a legal entity, but have not yet decided on the optimal form of the future organization? — Call our office by phone and our specialists will help you choose the best option for your situation.

Let's consider the most common organizational and legal forms of business entities:

Individual entrepreneur (IP)

An individual entrepreneur is a citizen engaged in business activities and registered in the prescribed manner with state registration authorities.

Minimum authorized capital : no.

Number of founders : one - the entrepreneur himself.

Management bodies : the entrepreneur himself.

Constituent documents : no.

Level of responsibility : a businessman is responsible for his obligations with personal property.

Public reporting : not required.

Purpose of activity : making a profit.

Distribution of profits : the entrepreneur disposes of profits at his own discretion.

Limited Liability Company (LLC)

A commercial organization whose authorized capital is formed by contributions from the founders.

Minimum authorized capital : 10,000 rubles.

Number of founders : At least one, no more than fifty.

Governing bodies : Council of Founders. Executive Director. Management can also be supplemented by such bodies as the supervisory board, audit commission and board of directors.

Constituent documents : charter.

Level of liability : The LLC is liable for its obligations with its property. Members of the company are not liable for its obligations. Their risk is limited by the size of their contributions to the LLC.

Public reporting : An LLC is not required to publish its operating results.

Purpose of activity : making a profit.

Profit distribution : proportional to shares in the authorized capital. The charter may provide for a different procedure for the distribution of profits.

Joint Stock Company (JSC)

A commercial organization whose authorized capital is formed from investments of shareholders.

Minimum authorized capital : from 100 minimum wages (minimum wage).

Number of founders : At least one. No more than fifty.

Governing bodies : General meeting of shareholders. Executive Director. Audit committee.

Constituent documents : Charter.

Level of liability : Shareholders are not liable for the obligations of the CJSC.

Public reporting : The company is not obliged to publish data on the results of its activities.

Purpose of activity : Making a profit.

Profit distribution : Shareholders receive profits in the form of dividends on shares.

Public joint stock company (PJSC)

It has the following differences from JSC:

• Larger authorized capital: from 1000 minimum wage;
• Unlimited number of shareholders;
• Obligation to publish an annual performance report.

S. Gavrilova, leading lawyer

https://www.youtube.com/watch?v=laLTz6wTDs0

in the Financial Newspaper. Regional issue”, 2011, N 20

Its organization, the procedure for interaction with partners, and responsibility for obligations depend on the legal form of conducting a business.

A limited liability company (hereinafter referred to as LLC) is a business company (legal entity) created by one or several persons, the authorized capital of which is divided into shares; members of the company are not liable for its obligations and bear the risk of losses associated with the activities of the company, within the value of their shares in the authorized capital of the company (Article 2 of the Federal Law “On Limited Liability Companies” dated 02/08/1998 N 14-FZ (hereinafter referred to as – Law N 14-FZ)).

An individual entrepreneur (hereinafter referred to as an individual entrepreneur) is a citizen who is registered in the prescribed manner in this capacity and carries out entrepreneurial activities without forming a legal entity, i.e. independent, at your own risk, activity aimed at systematically obtaining profit from the use of property, sale of goods, performance of work or provision of services (Article 2, 23 of the Civil Code of the Russian Federation).

During state registration of both individual entrepreneurs and LLCs, the home address of the individual entrepreneur or the general director of the LLC can be used as a legal address.

Meanwhile, a distinctive feature of an LLC is that it can be registered at the address of the rented (or own) premises where the executive body will be located, in any region of the country.

State registration of an individual entrepreneur is carried out only at his place of residence.

The procedure for state registration of LLCs and individual entrepreneurs does not differ significantly in complexity. The main difference between these procedures is the list of documents submitted to the registration authority (Article 12, 22.1 of the Federal Law of 08.08.

2001 N 129-FZ “On state registration of legal entities and individual entrepreneurs” (hereinafter referred to as Law N 129-FZ)), and according to the amount of the state duty for registration actions (for individual entrepreneurs the state duty is 800 rubles, for LLCs – 4000 rubles . – Article 333.33 of the Tax Code of the Russian Federation).

Registration periods are the same - no more than five working days from the date of submission of documents to the registration authority (Article 8 of Law No. 129-FZ).

Results

There is a separate line in the balance sheet to reflect retained earnings (profit remaining after the amount of income tax or net profit has been withdrawn from it). The figure entered into it corresponds to the amount of the entire net profit accumulated over the years of the company’s activity. During the reporting year, the value of retained earnings in accounting relating to this year can be seen in a separate accounting account. Dividends are paid out of net profit.

Sources: Order of the Ministry of Finance of Russia dated October 6, 2008 No. 106n

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How is it formed and what does it include?

A positive or negative result from the sale of products or the provision of services is reflected in the active-passive account 90 “Sales.” The debit of the account shows the full cost, VAT and other costs. The loan reflects revenue. The final balance is transferred to account 99 “Profits and losses”.

The following entries are made in the accounting book:

• Dt90Kt99 – profit made;
• Dt99Kt90 – loss received.

The operations of the enterprise, which are classified as operating and non-operating, are shown on account 91 “Other income and expenses”.

These include:

1. Sale and rental of assets owned by the company;
2. Depreciation and revaluation of non-current assets;
3. Transactions with foreign currency;
4. Investments in business shares of other companies;
5. Liquidation and donation of property;
6. Income and expenses from transactions with securities.

The postings are as follows:

• Dt91Kt99 – profit made;
• Dt99Kt91 – loss received.

This procedure for writing off the totals for accounts 90 and 91 is called balance sheet reformation. Many economists understand this term as the direct distribution of accumulated profit from account 84.

Similarly, the balance from accounts 76 “Extraordinary income and expenses” (for example, insurance compensation or losses from natural disasters) and 10 “Materials” (the cost of accepted inventory items that are unsuitable for production) is transferred to account 99.

Retained earnings increase when accounting errors are discovered that resulted in overstated expenses. And also in case of unclaimed dividends by shareholders, if more than three years have passed since they were accrued. Accordingly, errors that create an overstatement of income will reduce the accumulated profit.

The components of retained earnings are not always cash in the form of cash or in a checking account (a writedown of fixed assets increases earnings, but does not add cash). This must be taken into account when conducting economic analysis.

In the last days of the reporting year, the chief accountant writes off the final balance (profit or loss) from account 99 to account 84 “Retained earnings”.

Postings are made:

• Dt99Kt84 – upon receipt of profit;
• Dt84Kt99 – upon receipt of a loss.

After this, account 99 is reset to zero and no transactions are carried out on it until the beginning of the next year. Count 84 is active-passive. Before entering the total amount of accumulated profit into the financial statements, the amount of income tax is subtracted from it (later it can be adjusted).