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Level 3 retained earnings

  • Fellow PM.Dip
  • Practice Licence
  • 8 posts
  • # 108620

On some of the mock papers retained earnings from previous years is dealt with as an appropriation to the Profit and Loss account and some of the papers deal with it by adding to profit that is carried over to the Balance Sheet as a reserve.

In what circumstances would the retained profit be used in one or the other?

Any help would be grateful

Alan
  • Companion Fellow PM.Dip
  • Practice Licence
  • 82 posts
  • # 108639

Hi - the answer to this would be dependent on the particular examination question. If you are asked for the apporpriation account then it is usual to bring in the brought forward balance - it can then be included in any calculation of dividends, or transfers to reserves etc. If you are asked to produce balance sheet figures then the total amount of retained profits would be included in general reserves. Hopefully the question will be very clear as to what is required.

  • Jacquie Mount

    Head of Technical Policy

    ICB


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