Uncovered loss of the reporting year and previous years

A loss often occurs in the first years after the opening of a company and the start of operations. The business requires significant financial investments, and the income received does not cover them. But a loss can also occur for a long-established company: this may be due to an economic crisis, a decline in demand and other objective factors.

What is a loss and where is it shown? Why are there taxes, but there is no money in the account? Why is there a loss, but there is a profit in the statements? How to check loss-making statements? Is it possible to show a loss? Is it possible NOT to show a loss? How to transfer a loss to future periods and reduce taxes Transferring a loss to the simplified tax system “income minus expenses” Transfer of loss to OSNO Is it possible to accept documents dated last year?

For taxation For accounting and reporting

How does a loss affect obtaining loans and participating in tenders?

What is a loss and where is it shown?

A loss is when during a reporting or tax period there are more expenses than income.

Each organization maintains two types of records:

• accounting (for owners, investors, creditors, calculation of certain taxes, etc.);
• tax (for calculating income tax).

For the general taxation system, the loss is determined according to Article 274 of the Tax Code of the Russian Federation,

For the simplified tax system – clause 7 of Art. 346.18 Tax Code of the Russian Federation.

At the end of the year, the loss may be:

• in financial statements: balance sheet and profit and loss account;
• in tax reporting: income tax returns or declarations under the simplified tax system.

Reasons for losses

First of all, it should be noted that the tax service requires taxpayers to justify the formation of a loss; as an explanation, payers are required to submit an explanatory note indicating specific reasons.

A loss is always a negative result of a company’s activities. A pre-tax loss is a company’s financial result with a negative sign, resulting from the excess of costs over revenues before payment of all mandatory payments and taxes. The tax service will always require an explanation of the resulting result. No one is immune from losses; as a rule, such indicators are typical for new companies that have just started their activities and have encountered some obstacles. How to explain losses for the tax authorities? To begin with, it is worth knowing the reasons from education. This:

• problem with the sale and marketing of your own goods (services or works);
• due to a fall in demand for goods, the enterprise sets deliberately low prices, and in some situations lowers them below its cost;
• the company allocated funds for expensive repairs of equipment or for the purchase of such, and immediately reflected the amount of costs as part of production expenses, which was reflected in a negative result at the end of the year.

If, based on the results of the tax period (year), a negative profit indicator appears in the accounting registers, that is, a loss, it must be reflected in the annual reporting. Thus, the main document reflecting data on the financial result of the company’s activities is the profit and loss statement; an example of filling it out will allow you to avoid errors when drawing up the form. Also, the loss must be reflected in the annual balance sheet and in the financial statement. results.

Analysis of enterprise profit formation

Why are there taxes, but there is no money in the account?

Accounting and tax data may differ. A situation occurs when there is a loss in the financial statements, but a profit in the tax returns. In such cases, entrepreneurs are indignant: “Why do I have taxes, but there is no money in my current account”?

Example 1:

The OSNO company placed an advertisement on Instagram, met a foreign delegation in a restaurant and took out a loan to expand production. In the annual financial statements of such a company, the accounting profit may be less than in the income tax return.

The reason is that the listed expenses are standardized (advertising expenses, entertainment expenses, interest on loans). In accounting they will be included in expenses in full, and in tax accounting - in the amount of the norms established by the Tax Code of the Russian Federation.

Example 2:

The store on the simplified tax system paid for the improvement of the adjacent territory and conducted a special assessment of the working conditions of the workers. For accounting purposes, these expenses are fully accepted, but for tax purposes they are not.

The reason is that for the simplified tax system the list of expenses is closed, and special assessment of labor is not included in it (Article 346.16 of the Tax Code of the Russian Federation). Such expenses reduce income in accounting, but do not reduce income in taxes.

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.

Why is there a loss, but the reporting shows a profit?

The opposite situation is also possible, when there is a profit in the financial statements, but a loss in the tax statements.

Example 3:

The founder of an LLC with a share of more than 50% decides to donate equipment to his company free of charge.

• In the accounting of the LLC, income will be generated (clause 7 of PBU 9/99).
• For tax accounting, such receipt of property is not income (clause 11, clause 1, article 251).

Example 4:

A company using the simplified tax system pays for telephony using postpaid based on issued invoices. Communication services provided in December 2021 were paid for in January 2021. Since all persons on the simplified tax system use only the cash method, then:

• In accounting, these services will be carried out and included in expenses in December 2021, since accounting is carried out “on an accrual basis,” that is, expenses are reflected at the time they are actually incurred.
• Tax expenses will be accepted only in January 2021, since tax accounting under the simplified tax system is always carried out on a cash basis, and expenses are taken into account no earlier than they are paid.

In the tax reporting of 2021, this company will show more expenses, and in the accounting reports - less. Accordingly, the profit on the balance sheet will be higher than in the income tax return. This will definitely alert the tax office, and it will want an explanation.

How is retained earnings calculated on the balance sheet?

Retained earnings increase the liabilities of the balance sheet, and, consequently, the equity capital of the enterprise. Let's look at how to calculate retained earnings (RP) using an example:

Stroika LLC operated in 2021 with a profit of 1 million rubles, income tax (PIT) amounted to 200 thousand rubles. After paying the income tax, the profit amounted to 800 thousand rubles. It is this amount, as retained earnings, that is reflected in line 1370 of the balance sheet for 2017. If at the beginning of the year the NP value already appeared in the balance sheet, then at the end of the year it will be increased by 800 thousand rubles.

The indicator on page 1370 of the balance sheet will correspond to the value on page 2400 of report No. 2 “On financial results” if the company did not have an NP at the beginning of the year, and subsequently did not pay interim (for example, quarterly) dividends.

How to check unprofitable statements

The verification takes place in the form of a request for explanations of the causes of losses:

• or via electronic communication channels (contour, VLSI, Tax, etc.);
• or by mail to the legal address of the company.

The company must be located at the legal address of the organization and check its mail in a timely manner so as not to miss requirements or requests from regulatory authorities.

In the request, Federal Tax Service employees will require you to provide:

• tax registers (special registers for accounting for income tax, book of income and expenses under the simplified tax system);
• primary and other documents confirming the legality of indicating in the reporting the expenses that resulted in the loss. In particular, these can be: acts, invoices, contracts, balance sheets.

The request must be responded to within 5 business days from receipt of the request.

The earliest day of receipt of an EDF request is considered to be:

• The day you sent confirmation of receipt.
• Sixth working day from the date of receipt of confirmation; the period begins to run the next day after receipt of the request; It is necessary to send confirmation, otherwise you will be fined.

When receiving a request by mail, the moment of receipt is considered to be the sixth day from the date of sending (Clause 6 of Article 69 of the Tax Code of the Russian Federation).

When receiving a request in person, the date of receipt of the request is considered the date of its delivery, which is signed by the recipient. Any representative of the company can receive it.

Is it possible to show a loss?

A legal entity cannot carry out unprofitable activities for a long time - this is what the tax authorities think. In their opinion, an unprofitable company can survive only in two cases:

• within a group of companies;
• used for illegal purposes by its leaders.

A loss in tax reporting is a reason for an audit by the tax service. The probability of an unprofitable company being audited by tax authorities is almost 100%. This is a mandatory criterion for verification - if the tax authorities’ computers see a loss of even 1 kopeck, the system automatically generates a request to explain the loss.

If the expenses are real, you can safely show the loss and subsequently confirm it with documents at the request of the Federal Tax Service.

It makes sense to show a loss if in the future you plan to reduce your expenses and, accordingly, your income tax by the amount of the resulting loss. This is called "carrying forward losses."

Is it possible NOT to show a loss?

When you should not show losses in financial statements:

• if expenses are questionable;
• if a company ceases operations, then it does not need to use the loss to reduce taxes in the future;
• Other reasons are also possible, for example, management or the chief accountant are afraid of inspections.

When, for some reason, a company does not want to show a loss, expenses can be “removed” from the income tax return. There are no penalties for reducing expenses for tax purposes, because you will pay more in taxes than you otherwise would have.

However, the financial statements must be reliable. Therefore, if there really is a loss, then it must be shown in accounting and annual financial statements.

If you nevertheless decide to hide the loss in your financial statements, its unreliability, if discovered, may result in fines:

1. from 5,000 to 10,000 rubles (Article 15.11 of the Administrative Code) per official - accountant or director.
2. from 10,000 to 30,000 rubles fine for gross violation of the rules for accounting for income and expenses (Article 120 of the Tax Code of the Russian Federation).

How to carry forward losses to future periods and reduce taxes

Carrying forward a loss to the future means that over the coming years you will be able to reduce the tax base for income tax (or tax under the simplified tax system) by the amount of the loss.

The tax base is the amount of profit that must be multiplied by the tax rate to arrive at the tax payable.

When reducing, be sure to follow certain rules:

• If losses were incurred in several years, then the earliest ones are written off first, and then the later ones.
• The company must keep primary documents, other supporting documents and tax accounting registers for as long as it suffers this loss, and for another 4 calendar years.
• A loss received on the simplified tax system cannot be taken into account on the main tax system, and vice versa.

Transfer of losses to the simplified tax system “income minus expenses”

You can carry forward the loss in full over the next 10 years.

Example 5:

Let’s say that in 2021 the company’s income was 2,000,000, expenses were 3,000,000, and the company’s loss was 1 million rubles.

Minimum tax under the simplified tax system: 2,000,000*1%= 20,000

In 2021, the company received a tax profit (tax base for income tax) of 1,200,000 rubles. She can reduce the basis by the minimum tax and by the loss of previous years:

10 — 1 000 000 = 180 000

The company will calculate tax under the simplified tax system on the remaining amount of 180,000 rubles.

Transfer of loss to OSNO

In OSNO, the rules for transferring losses are more complicated:

• Starting from 2021, it is possible to carry forward a loss that arose in 2007 and later to subsequent years without time restrictions, not only for the last 10 years (Letter of the Ministry of Finance dated January 9, 2021 N SD-4-3 / [ email protected] ). For example, a loss that occurred in 2007 can be transferred to 2021 and 2018-2019. Losses incurred before 2007 can no longer be transferred.
• Until 2021 inclusive, the tax base could be reduced by the entire amount of the remaining loss, but not more than 100% of the base, for 10 years. In 2017-2019, the tax base can be reduced only by 50% (clause 2.1 of Article 283 of the Tax Code of the Russian Federation) and the 10-year limit is no longer in effect. Starting from 2021, you can reduce the tax base for losses from previous years in full, also without time restrictions.

Example 6:

The loss in 2021 amounted to 1 million rubles.

In 2021, “Bicycles” received a tax profit of 200,000 rubles. Income tax for 2021 will be calculated as follows:

• 50% of the profit, but not less than the remainder of the loss - 100,000
• Tax base: 200,000 – 100,000 = 100,000
• Income tax: 100,000 * 20% = 20,000
• Remaining loss for 2021: 900,000 rubles.

In 2021, the company will receive 450,000 rubles. tax profit. Tax for 2021 will be as follows:

• 50% of the profit, but not less than the remainder of the loss - 225,000
• Tax base: 450,000 – 225,000 = 225,000
• Income tax: 225,000 * 20% = 45,000
• Remaining loss 2021: 675,000.

In 2021, the company will receive a new loss of RUR 10,000. Nothing can be reduced. The tax payable will be 0 rubles.

In 2021, the company will make a profit of 700,000 rubles. She will be able to reduce it by the remainder of the 2021 loss and the full 2021 loss.

• Tax base: 700,000 0 = 15,000
• Income tax: 15,000 * 20% = 3,000
• Remaining loss: 0.

Loss on balance

Many accountants, when reflecting the amount of retained earnings (uncovered loss), wonder where these amounts should be reflected in the asset or liability of the balance sheet. Definitely a liability, since this is a share of the owner’s capital, which has not yet been directed to any of the company’s needs. If it is a loss, then the owner's share of capital is reduced by that amount. Now we know how to reflect a loss on the balance sheet, that is, also as retained earnings, but with a minus sign.

To calculate the amount of retained earnings, the accountant uses the following formula:

NPk = NPn + PP – D, where

NPk – retained earnings at the end of the reporting period;

NPN – retained earnings at the beginning of the reporting period;

PE – net profit after payment of all mandatory payments and taxes;

D – the amount of dividends due to the owners of a share of the authorized capital, paid from the profits of previous periods.

If a company has a loss in the current reporting period, then it is also reflected in the balance sheet, but with a minus sign. An uncovered loss on the balance sheet is bad, since the company does not have or does not have enough funds in the reserve fund to compensate for it. Accordingly, the company's capital is reduced by this loss. But if the business conducts business successfully in the future, the organization can cover its “minus” with the profit received, and then not only the tax authorities, but also its competitors will not have doubts about the organization’s solvency.

The formula for calculating the loss is as follows:

NPk = NPn – U – D, where

Y – loss incurred in the current reporting period.

The value of the NPK indicator can be equal to “0” or have a “-” sign; this option will occur if the resulting loss of the organization exceeds the NPK, that is, the company’s losses in excess of the income received in combination with retained earnings at the beginning of the reporting period. As well as retained earnings, losses are reflected in the balance sheet on line 1370.

When a negative value appears in the balance sheet on line 1370, economists are required to conduct a thorough analysis of the reasons that provoked this phenomenon, since they may subsequently negatively affect the competitiveness of the product, which will lead to bankruptcy of the enterprise. Knowledge of the circumstances and reasons will allow management to find the right ways to solve the problem, for example, change the sales strategy or repurpose production.

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Can I accept documents dated last year?

For tax purposes

Expenses can reduce the tax base only in the period in which they were incurred. Confirmation of the expenditure is primarily a primary document.

However, legislators created a “loophole” and allowed documents to be transferred to subsequent tax periods. A company, using either the OSNO or the simplified tax system, can record documents from previous years in tax accounting if these documents would have resulted in a tax reduction rather than an increase in their tax period (Clause 1 of Article 54 of the Tax Code of the Russian Federation).

For accounting and reporting

In accounting, when receiving documents from previous periods, you must be guided by the following rules:

• If documents are received after the end of the year, but before the date of signing the financial statements, they are entered in December of the reporting year (clause 6 of PBU 22/2009).
• If documents are received after the end of the year and after the date of signing and approval of the financial statements, they are entered in January of the current reporting period. Those. in the period when they were discovered (clause 10. PBU 22/2009).

Uncovered loss

To record losses incurred in the reporting year, a separate subaccount – 84/4 – can be created. If its value is not covered by the profits of previous periods, then the founders of the company make a decision to repay it from other sources, or leave it on the balance sheet. In this case, it becomes uncovered and is entered with a negative value in line 1370 of the balance sheet.

Sources for covering losses are various funds and reserves. Postings can be like this:

How does a loss affect obtaining loans and participating in tenders?

A loss in accounting and tax reporting will have a negative impact on a company that is going to take out a loan or participate in tenders.

When issuing a loan, banks consider the profitability of the enterprise, assets and solvency. If the business is unprofitable, most likely the decision for such a company will be negative and the loan will not be given.

As for participation in tenders, there is no legislative prohibition for the participation of companies that had a loss in the previous period. However, the customer may voice the requirement to provide such documents as a certificate of no debt, financial statements and a break-even company has a better chance of winning the tender.