Retained earnings in the balance sheet

06.06.2018

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The first months of the year are the time to take stock. It is worth thinking about the fate of retained earnings. Let's consider who has the right to use it and what it can be spent on.

With the final entry in December, the amount of net profit (loss) of the reporting year is written off from account 99 “Profits and losses” to the credit (debit) of account 84 “Retained earnings (uncovered loss)”. Thus, on account 84, after the balance sheet reformation, the financial result is formed, which will be announced at the general meeting of shareholders (participants). If, as a result, the organization has a debit balance on account 84, this, unfortunately, indicates that the main goal of entrepreneurial activity has not been achieved: the organization has incurred a loss. If account 84 has a credit balance, this indicates that the organization has retained earnings that can be used.

What is retained earnings?

Firstly, it is part of the organization's capital. It is not for nothing that it is reflected in Sect. III “Capital and reserves” balance sheet. And capital is nothing more than the difference between an organization's assets and its liabilities.

But if assets and liabilities are associated with real objects, then capital is a kind of abstract financial quantity that shows from what sources the organization exists: authorized, additional or reserve capital, retained earnings. For example, in the Chart of Accounts for accounting the financial and economic activities of organizations (hereinafter referred to as the Chart of Accounts), approved by Order of the Ministry of Finance of Russia dated October 31, 2000 N 94n, in the commentary to account 84, retained earnings are directly named as a source of financial support for the production development of the organization.

Accordingly, if the organization’s capital contains such a component as retained earnings, this is a very good sign and indicates that the organization earns more than it spends.

Secondly, the credit of account 84 shows the amount of net profit received for the entire period of the organization’s activities, and not just for the last year. This value represents the final result of the company’s activities over the entire period of its existence, and the owners have the right to dispose of this accumulated profit at their own discretion.

Thirdly, the credit balance of account 84 indicates that the organization’s profit was not used to withdraw funds from the company’s turnover . What this means will be explained below.

Who has the right to use retained earnings?

Only the owners of organizations: shareholders or participants have the right to distribute earned profit and decide what expenses should be incurred at its expense. It’s not for nothing that accountants call account 84 “the owner’s account.” In accordance with the current legislation, the decision on its distribution is made by the general meeting of shareholders (participants) (clause 3, clause 2, art.

Analysis and sources of increasing the organization's profit

First of all, in order to maximize the profit of an enterprise, you first need not to develop specific methods, but to analyze the market, competitors, customers and much more. Analysis is the basis on which any actions are based to increase the company’s own profit.

Sources of profit in an organization can be:

• reduction in production costs;
• diversification of production;
• implementation of budgeting and financial planning;
• cost reduction;
• opening new markets;
• competitive advantage;
• increasing the volume of products sold;
• sale or rental of unused property;
• introduction of the latest technologies and equipment in production;
• restructuring.

Analysis of retained earnings and valuation reserves

Retained earnings are part of the capital of the holders of residual rights (owners), accumulating profits not paid in the form of dividends, which is an internal source of long-term financial resources. According to its economic content, retained earnings are classified as free reserves.

Funds of reserves and retained earnings are placed in specific property or are in circulation. Their value characterizes the result of the enterprise’s activities and indicates how much the enterprise’s assets have increased from its own sources.

When analyzing retained earnings, the change in its share in the total equity capital is assessed. A decrease in this indicator indicates a decline in business activity and... At the same time, when analyzing the structure of equity capital, one must keep in mind that the amount of retained earnings is largely determined by the accounting policies of the enterprise.

Valuation reserves are formed, as a rule, to cover the amount of reduction in assets. A typical example of valuation reserves is a reserve for doubtful debts, which in the asset must correspond to the amount of doubtful receivables, one part of which will be written off by the enterprise, the other may be collected and used to increase profits. Valuation reserves also include reserves for impairment of investments in securities. The presence of a formed reserve allows you to clarify the balance sheet assessment of financial investments. Also, the formed reserve is a source of covering possible losses and losses of the organization associated with a decrease in the market value of its securities.

Contributions to valuation reserves are operating expenses for the organization.

Another example of a valuation allowance is a reserve for impairment of the value of tangible assets.

Ways, methods and ways to increase company profits

Motivating employees is one of the most effective ways to increase profits. It is necessary to show employees that their personal income depends on the profitability of the enterprise. This will encourage them to put as much effort into their work as possible.

The introduction of new technologies and automation of production will lead to the possibility of reducing the number of employees, and accordingly, will reduce wage costs.

The riskiest way would be to increase prices. To use this method, the manufacturer must be confident that customers are willing to purchase the product, even if prices increase.

Another way is to reduce costs. But it is important to understand that reducing costs always leads to a decrease in product quality. Because of this, most buyers may go to competitors. This method is more suitable for mass production.

What does retained earnings mean?

Most enterprises that maintain financial statements in accordance with accounting standards are familiar with the concept of retained earnings (RE).

Retained earnings are funds received as a result of the business activities of the company and remaining at its disposal after paying tax deductions, dividends, wages, etc. That is, NP is the amount that remains with the company after making all mandatory payments.

Sometimes, instead of the term “retained earnings,” the concepts of “retained surplus” or “profit retention ratio” are used.

Retained earnings differ from net earnings in that they are calculated for the entire life of the organization, and not just for a specific period. However, it is logical to assume that at the end of the year the indicators under consideration will be equal to each other.

In the balance sheet, retained earnings are classified as the company's liabilities. It is believed that it should be distributed among the owners and used to optimize the organization’s business model. Until the moment of distribution, such income can be called nothing more than the debt of the organization in relation to its founders. NP is a long-term source of financing, and therefore its accumulation must necessarily become one of the points of the company’s financial development strategy.

Where should retained earnings be directed? There are several main directions:

• payment of dividends to owners/shareholders;
• compensation for early losses;
• accumulation of reserve fund funds;
• other goals.

Let's take a closer look at the last point. The decision to allocate retained earnings for other purposes must be made by the management of the enterprise. And we are not talking about nominal officials, but about business owners. Problems of accounting and distribution of saved surplus funds are usually discussed at the final annual meeting, and the decisions made are documented in minutes.

Top 3 articles that will be useful to every manager:

• Financial control at the enterprise
• Net profitability of the enterprise
• How to build a company's financial structure

Factors and reserves for increasing the profit and profitability of a company

There are many factors that can affect profit growth. And it is not always possible to accurately assess the degree of influence of one or another factor.

Factors influencing the amount of profit can be divided into internal and external.

External (uncontrollable) factors include:

• extraordinary events (natural disasters);
• political changes in the country;
• changes in legislation;
• competitors;
• social conditions in the state;
• inflationary processes;
• changes in the banking and financial sector of the economy;
• suppliers and partners;
• buyers.

Internal (controllable) factors:

• financial policy within the enterprise;
• social (trainings and courses for company employees);
• introduction of new technologies;
• release of new products.

How to calculate retained earnings

In most cases, retained earnings for a given accounting period is the difference between the company's net income and dividends paid to shareholders. The calculation of the indicator is carried out by accounting workers, but in order to solve problems associated with the distribution of such profits, the owner of the enterprise also needs to know the basic principles of its accounting and formation.

• Find the account.

First, it is necessary to find out in which section of the statements the organization's retained earnings are reflected. To do this, you should find the heading “Shareholder's share in the company's funds” in the balance sheet. The amount indicated in this account reflects all profits accumulated by the company since its inception and not distributed among shareholders. If the numerical indicator of the account is negative, then you should think about the presence of financial problems.

By using the retained earnings that a company has retained since its founding, it is possible to determine the size of the budget surplus after the next accounting period. So, if your enterprise’s NP is 21 million rubles and during the reporting period you deposit another 6 million rubles into this account, the new value will be 27 million rubles. If during the next period retained earnings amount to 12 million rubles, then this account will already have 39 million rubles. Thus, since the establishment of the enterprise, in the course of a successfully implemented financial strategy, it was possible to accumulate 39 million rubles (after taking into account all mandatory expenses).

• Think like an investor.

In this matter, special attention should be paid to the relationship between the amount of retained earnings of the organization and the policies of its investors. On the one hand, every shareholder of a prosperous enterprise wants to receive decent dividends. But on the other hand, all investors should be interested in the absence of problems with the development of the organization, because the greater the company’s profit, the greater the size of the dividends received.

In order for the business to expand, customer turnover to increase, and income to increase with each reporting period, the company must reinvest retained earnings in its development. Successful reinvestment of an IR over the long term will result in an increase in the company's profitability and share price, meaning that investors will receive much more money than if they had required huge contributions in the first place.

In cases where a company accumulates cash in its accounts, but does not develop in any way, investors begin to demand an increase in the amount of cash payments, since they consider this a problem and do not see the point in such accumulation of income.

An organization that does not make a profit or does not pay dividends has minimal chances of attracting the interest of investors.

• Analyze the factors influencing the indicator.

To solve the problems of accounting for retained earnings, it is necessary to know on what factors the indicator in question depends. The size of the NP may decrease or increase, but such changes are not always the result of an increase or decrease in the enterprise’s income.

Let's consider several factors influencing the value of NP:

• net profit;
• dividends to investors;
• cost of products sold;
• Administrative expenses;
• the amount of tax deductions;
• current business development strategy.

Gross profit increase

An increase in turnover inevitably leads to an increase in the gross profit of the enterprise. For this reason, it is important to monitor dynamics and ensure that production volumes are stable. Unsold products lying in the warehouse have a negative impact. To prevent this, you can sell products at discounts.

An analysis of the profitability of products sold will make it possible to understand which products need to be paid special attention to when selling them or removed from sales altogether in order to reduce the costs of their production.

An assessment of fixed assets will allow you to understand whether they generate gross profit. Otherwise, it would be better to sell off unprofitable fixed assets.

Increasing the authorized capital at the expense of retained earnings

The authorized capital of an enterprise can be increased at the expense of retained earnings. This requires the consent of all participants and the inclusion of a clause on increasing the authorized capital at the expense of retained earnings in the charter of the enterprise. Then you need to submit documents to the inspectorate for state registration of amendments that will be made to the constituent documents of the enterprise, as well as changes to the Unified State Register of Legal Entities.

In joint stock companies, the authorized capital can be increased at the expense of retained earnings in two ways:

• additional issue of shares;
• increase in the nominal value of shares.

The procedure for increasing the authorized capital takes place in the following order:

• consent of all shareholders to increase the authorized capital at the expense of retained earnings in one of two ways;
• approval of the decision on additional issue of shares;
• state registration of shares issue;
• placement of shares on the stock exchange;
• providing a report on the placement of shares to the Federal Financial Markets Service;
• registration of a new version of the charter.

Increase in retained earnings (reduction of uncovered loss)

You can increase retained earnings or reduce losses by providing gratuitous assistance to participants (shareholders). However, this option may entail significant tax costs in the form of a 20% profit tax on the entire amount of gratuitous injections (clause 8 of Article 250 of the Tax Code of the Russian Federation).

It is possible to avoid significant tax losses only in the cases provided for in paragraphs. 11 clause 1 art. 251 Tax Code of the Russian Federation. In particular, income not taken into account when determining the tax base includes property received by a Russian organization free of charge:

- from an organization, if the authorized capital of the receiving party consists of more than 50% of the contribution (share) of the transferring organization;

- from an organization, if the authorized capital of the transferring party consists of more than 50% of the contribution (share) of the receiving organization;

- from an individual, if the authorized capital of the receiving party consists of more than 50% of the contribution (share) of this individual.

The only limitation is that the received property (except for funds) is not transferred to third parties within one year from the date of its receipt. In addition, it is necessary to take into account paragraphs. 4 paragraphs 1 art. 575 of the Civil Code of the Russian Federation, according to which donation is not allowed, with the exception of ordinary gifts, the value of which does not exceed 500 rubles, in relations between commercial organizations.

You should pay attention to ways to improve such an indicator as retained earnings (uncovered loss), reflected on line 470 of the balance sheet. This indicator characterizes the success of the company over a number of years. The resulting losses can be covered not only by injections from outside, but also by redistributing the structure of equity capital and reserves. Moreover, this will not affect the final value of net assets.

The main ways to cover losses are as follows:

1. Authorized capital. If the value of net assets becomes less than the authorized capital of the company, the difference is used to cover its losses (clause 4 of Article 90, clause 4 of Article 99 of the Civil Code of the Russian Federation, clauses 4, 5 of Article 35 of the Law on OJSC, clause 3 Article 20 of the LLC Law). An entry is made in the accounting records: D-t 80 “Authorized capital”, K-t 84 “Retained earnings (uncovered loss)”.

2. Reserve fund. According to paragraph 1 of Art. 35 of the Law on JSC, a reserve fund is created in the amount of at least 5% of its authorized capital through annual contributions of at least 5% of net profit until the amount established by the company’s charter is reached. One of the purposes of the reserve fund is to cover society's losses. The Law on LLC does not stipulate a detailed procedure for the creation and use of the reserve fund of an LLC, however, in practice, such companies, as a rule, enshrine in the charter and apply the procedure established by the Law on JSC.

3. Additional capital. An organization through reorganization can reclassify additional capital and reserves as retained earnings. When merging, joining, dividing, spinning off and transforming an organization, if the value of the net assets of the successor turns out to be greater than the amount of the authorized capital, then the difference is subject to settlement in the opening balance sheet in the section “Capital and reserves” with the numerical indicator “Retained earnings (uncovered loss)”. In case of conversion of shares, the difference that arises is attributed to additional capital (Order of the Ministry of Finance of Russia dated May 20, 2003 N 44n).

Increase in authorized capital due to net profit

The concepts of “net profit” and “retained earnings” are very similar in meaning. The main difference between these definitions is that the term “retained earnings” is used most often when talking about profits that have been accumulated for the reporting year and previous years. The term “net profit” is the profit for the reporting year only.

Based on this, we can conclude that the methods for increasing the authorized capital at the expense of net profit will be the same as if retained earnings were used for this purpose. These methods have already been described previously.

If there is a lot of retained earnings, then where is the money?

67.1 of the Civil Code of the Russian Federation, paragraphs. 11 clause 1 art. 48 of the Law of December 26, 1995 N 208-FZ “On Joint-Stock Companies” (hereinafter referred to as the Law on JSC), paragraphs. 7 paragraph 2 art. 33 of the Law of 02/08/1998 N 14-FZ “On Limited Liability Companies” (hereinafter referred to as the LLC Law)).

Accordingly, the accounting of the decisions of the participants (shareholders) will depend on the instructions that they record in the minutes of the general meeting and give to the management of the organization.

However, when making this decision, many, unfortunately, make mistakes. It is an accountant who can suggest the right decision to shareholders and participants. And our task is to help him with this.

What can and what should you spend retained earnings on?

The procedure for distribution of profits is regulated by the Laws on JSC and LLC. As for accounting, what you can spend retained earnings on is stated only in the annotation to account 84 in the Chart of Accounts. There are no further references to how retained earnings can be spent in accounting regulations.

So, let's see what the profits are spent on.

Reserve Fund

For joint-stock companies, the Law provides for the obligation to form a reserve fund from net profit. Its size must be at least 5% of the authorized capital of the company (Clause 1, Article 35 of the Law on JSC). The fund is “spent” to cover losses (in most cases), as well as to repurchase its own shares and redeem its own bonds (paragraph 3, paragraph 1, article 35 of the Law on JSC).

Limited liability companies, unlike joint stock companies, can create a reserve fund on a voluntary basis (Clause 1, Article 30 of the LLC Law). The size of the reserve, the amount of annual contributions to it and the purposes for which the fund can be spent (LLCs usually also use it to cover losses) are prescribed in the company's charter.

The reserve fund is created by posting:

Debit 84 “Retained earnings (uncovered loss)” Credit 82 “Reserve capital”.

In the balance sheet, just like retained earnings, it is reflected in section. III “Capital and reserves” on line 1360. Thus, part of the net profit is actually transferred to another item of capital. But at the same time, the structure of the balance sheet improves, since the owners are actually prohibited from withdrawing funds from the company’s turnover (for example, paying dividends) using the amount of the formed fund. We can say that the reserve fund is a kind of financial safety net for organizations.

Dividends

The owners can use the profit remaining after the formation of the reserve fund to pay dividends. It should be noted that this is the most common way to use profits. The accrual of dividends reduces retained earnings, and their payment leads to a decrease in the organization's assets (money or property).

In accounting, the accrual of dividends will be reflected in the following entry:

Debit 84 “Retained earnings (uncovered loss)” Credit 75 “Settlements with founders.”

Payment of dividends in cash should be reflected by the following entry:

Debit 75 “Settlements with founders” Credit 51 “Current accounts”.

If the money was previously withdrawn from the current account in order to issue it in cash, then the posting will be as follows:

Debit 75 “Settlements with founders” Credit 50 “Cash”.

Dividends can be paid not only in money, but also in property, because current legislation does not prohibit this. According to the Federal Tax Service of Russia, when transferring property to pay dividends, VAT must be charged (Letter of the Federal Tax Service of Russia dated May 15, 2014 N ГД-4-3/ [email protected] , agreed with the Ministry of Finance of Russia).

It should be noted that there are separate court decisions in which the arbitrators agree that the transfer of property for the payment of dividends is not a sale and is not recognized as subject to VAT (Resolution of the Federal Antimonopoly Service of the Ural District dated May 23, 2011 in case No. A07-14871/2010) . Therefore, if an organization does not include in the VAT base the value of property transferred to pay dividends, then it will most likely have to defend its position in court. But is it worth doing this? After all, if an organization decides to pay dividends in money, but it does not have any, then first it sells the property, calculates VAT on its sale, and only then transfers the funds to shareholders (participants). In other words, in any case, if there is no money, you will first have to pay VAT and only then settle accounts with the owners.

If goods or fixed assets, the sale of which is not subject to VAT (for example, land plots), are transferred as dividends, then VAT is not required.

The transfer of property to pay off debt on dividend payments is reflected in accounting as follows:

1) upon transfer of goods or finished products:

2) when transferring a fixed asset:

Is it legal to use profits differently?

Sometimes the owners of an organization make decisions to pay bonuses to employees, financial assistance, and the acquisition of fixed assets at the expense of profits. Some decide to create so-called consumption and accumulation funds. Is it correct?

First, let's look at expenses at the expense of profits. Firstly, the Laws on JSC and LLC do not provide for any payments from profits to anyone other than the owners. As we have already mentioned, this is the account of the owners; accordingly, only they have the right to receive dividends.

Secondly, the Russian Ministry of Finance has already repeatedly expressed the opinion that account 84 is not intended to reflect all kinds of social and charitable expenses, payments of material assistance and bonuses (Letters of the Russian Ministry of Finance dated June 19, 2008 N 07-05-06/138, dated December 19. 2008 N 07-05-06/260, etc.).

From the point of view of the financial department, the organization’s expenses for sporting events, recreation, entertainment, cultural and educational events and other similar events, as well as the organization’s transfer of funds (contributions, payments, etc.) related to charitable activities are other expenses and should be accounted for in account 91 “Other income and expenses”. Only the payment of dividends is not an expense of the organization; any other disposal of assets is an expense of the current period (clause 2 of the Accounting Regulations “Expenses of the Organization” PBU 10/99, approved by Order of the Ministry of Finance of Russia dated May 6, 1999 N 33n).

Therefore, all kinds of bonuses, financial assistance and charity expenses will also affect the organization’s net profit, but only during the period of these expenses. They have nothing to do with last year's net profit.

Thus, all kinds of payments from net profit, with the exception of dividends, are illegal .

As for the formation of the consumption fund at the expense of net profit, this is simply an echo of Soviet accounting. Then real money was transferred to the production development funds, which were kept in the bank separately from the organization’s funds, and it was with this money that fixed assets were purchased (commentary to account 87 of the no longer valid Instructions for the application of the Chart of Accounts for accounting of production and economic activities of associations, enterprises and organizations, approved by Order of the USSR Ministry of Finance dated March 28, 1985 N 40). Today, no one transfers money intended for the development of production anywhere.

When purchasing fixed assets, organizations simply spend funds from the current account and one asset (money) is exchanged for another (fixed asset). Account 84 is not used at all in postings. Therefore, if the owners of the organization decide to direct profit to the development of production, and the accountant makes an entry in the accounts Debit 84, subaccount “Profit for distribution”, Credit 84 “Reserved profit”, this does not affect the final balance on the credit of account 84.

This posting, by and large, only indicates that the owners refused to receive dividends this year and decided not to withdraw funds from the company’s turnover. But such a decision will allow the organization to improve the structure of its balance sheet and make its financial position more stable. But since the final balance on the credit of account 84 will not change, nothing prevents the owners of the organization from distributing in the future the profit reflected in the balance sheet as undistributed.

Is it possible to distribute profits from previous years?

Another question that worries both owners and accountants: is it possible to distribute profits from previous years as dividends? The answer is yes. Can. After all, neither tax nor civil legislation contains restrictions on the payment of dividends from the profits of previous years. Therefore, if an organization has “accumulated” profits from previous years, the general meeting of shareholders (participants) can use it to pay dividends.

Neither the regulatory authorities object to this (clause 1 of the Letter of the Federal Tax Service of Russia dated 05.10.2011 N ED-4-3/ [email protected] , Letter of the Ministry of Finance of Russia dated 20.03.2012 N 03-03-06/1/133), nor courts (Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated June 25, 2013 N 18087/12, Decision of the Supreme Arbitration Court of the Russian Federation dated November 29, 2012 N VAS-13840/12). The Supreme Arbitration Court of the Russian Federation came to the conclusion that, by their economic nature, net profit and retained earnings are identical, therefore nothing prevents the owners from deciding to pay dividends not only from the net profit of the reporting year, but also from the retained earnings of previous years.

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A balance sheet is a final document that allows you to understand the financial condition of an enterprise. It is an analysis of the company's assets, the sources of these assets, as well as the company's liabilities.

Assets are the resources of an enterprise; they are capable of generating economic benefits. Balance sheet items are arranged from less liquid to more liquid:

• fixed assets and unfinished capital construction,
• stocks and goods,
• cash.

Liabilities are the sources of formation of assets:

• accumulated profit of the enterprise,
• loans and credits,
• accounts payable.

Balance sheet items are arranged according to the degree of urgency of return.

All articles have data for 3 reporting periods (3 calendar years). It is the availability of data for several periods that makes balance sheet analysis possible.

It is customary to carry out horizontal analysis (analysis of balance sheet items) and vertical analysis (analysis of changes over time in the share of each balance sheet item).

The following is a general description of the balance.

The correctness of the document is visually checked, all required details, signatures and seals are filled out.

There is a change in the balance sheet currency (if the balance sheet currency has decreased, this is an alarming sign).

Balance sheet structure. Analysis of the structure of Assets. The ratio of current and non-current assets.

Studying the composition of non-current assets, determining the share of fixed assets. If the share of fixed assets in the composition of non-current assets is large, then in order to maintain financial stability the enterprise must have a high share of equity capital as the main source of financing. Studying the composition of current assets, determining the status of settlements with consumers.

Measures to increase profits

The main measure to increase profits is profit planning.

Profit planning can be done in three different ways:

• direct account;
• revenue relationships;
• analytical approach.

The first method is the most common in organizations. The essence of the method is that profit is calculated as the difference between the proceeds from the sale of goods and its full cost.

The essence of the second method is to group expenses into fixed and variable.

The analytical method is used as an addition to the direct counting method and is used mainly with a large range of products sold.

Development of activities and strategies to increase profits

There are several strategies to increase profits:

• creation of new products. Allows you to expand your circle of clients and expand your business scope;
• cross-selling system. This method is relevant in online stores. When a buyer selects a product, recommendations for a similar product that might interest him pop up;
• system of regular touches. Most businesses notify their customers about discounts or new product releases 2-3 times. If the client does not buy anything after this, then he is added to the list of hopeless ones. But, as the experience of many companies shows, if you notify the client 7-8 times, the percentage of sales will increase significantly;
• educational marketing. The essence of this method is that before you sell something to your potential client, you first need to teach him something useful that will help solve his problems.

Increase store profit

One of the ways to increase a store’s profit is to increase the average check. For example, when a buyer goes to the checkout to order a product, the seller offers him to buy something else at a discount or as related products. Many customers agree to purchase another item at the checkout.

Very often in stores, especially if it is a clothing or cosmetics store, customers come in just to “look”. In this case, the seller should ask “Are you visiting us for the first time?”, and then offer the client an SMS newsletter with information about upcoming promotions or a club card.

As an example: increasing restaurant profits

The main ways to increase restaurant profits:

1. Brag. If a restaurant has the best chef or the most talented singer in town, be sure to tell them about it.
2. Increase in order cost. When ordering, the waiter can recommend an accompanying dish, for example, if a guest orders meat, then he can recommend a side dish (which turned out to be incredibly tasty today).
3. Improvement of employee qualifications. The main thing in a restaurant is its waiters. In fact, waiters are the face of any restaurant. If the waiters are polite and know how to create a cozy atmosphere, then the guest will definitely come back again.
4. Positive reviews. The more positive reviews about a restaurant are heard in the city, the more people will want to come there.