Retained earnings

Retained accumulated profit reserve are accumulated profit left in the company. We have not yet spent this amount on anything else: we did not use it for investments or withdraw it as a as dividend.

Retained accumulated profit reserve is the part of the earnings after tax that has been accumulated during the operation of the business, but has not yet been spent by the owners of the company. This part of the profit was not taken out as a as dividend, nor was it spent on investments, current assets or anything else. The earnings after tax of the previous year automatically increases accumulated profit reserve, unless we decide to allocate it elsewhere.

The accumulated profit reserve is therefore a virtual company bush. This is where the generated and unpaid profit are collected, which can of course be used for many purposes later. If difficult times come, it can also be used to directly for financing the company's operations. The accumulated profit reserve will be able to serve the realization of longer-term, larger development goals in the future.

Saving and hoarding is wise. However, it is not expedient to increase the accumulated profit reserveindefinitely. It is true that this problem can rarely be established in enterprises. Unfortunately, it happens much more often that the retained accumulated profit reserve turn negative. In the latter case, the missing capital must be made up by the owners.

If the accumulated profit reserve is in foreign currency, it must be recorded and registered at the at the exchange rate valid on the day of the financial performance. This is the book value regardless of how the exchange rate later.