What is surplus reserve and what is the relationship between it and the owner s equity?

Surplus reserve is a type of reserve fund that is withdrawn from the profits of a business and is mainly used to cover losses.

It is an integral part of the owner's equity.

Surplus reserve refers to the accumulation of earnings formed by an enterprise from after-tax profits, retained within the enterprise, and with specific purposes.

Surplus reserve is divided into two categories: Community Chest and General Surplus Reserve according to its different uses. The Community Chest is earmarked for the expenditure of employee welfare facilities, such as the purchase and construction of staff dormitories, nurseries, barber rooms, etc. Article 177 of the Old Company Law stipulates that a company enterprise shall withdraw the statutory public welfare fund at a rate of 5% to 10% of the after-tax profits.

The new Companies Law 2006 only stipulates that companies can withdraw 10% of their after-tax profits from their statutory provident fund. Canceled all about"Statutory Community Chest"provisions. According to the provisions of the Enterprise Income Tax, the losses of the previous years (within 5 years) can be made up by the pre-tax profits, and from the sixth year onwards, they can only be made up by the after-tax profits of the sixth year.

When the cumulative amount of statutory surplus reserve has reached 50% of the registered capital, it can no longer be withdrawn. When calculating the base of statutory surplus reserve, the undistributed profits of the enterprise at the beginning of the year should not be included.

Generally, there are two kinds of surplus reserves: one is the statutory surplus reserve. The statutory surplus reserve of the listed company shall be withdrawn according to 10% of the after-tax profit, and the statutory surplus reserve may not be withdrawn when the cumulative amount of the statutory surplus reserve has reached 50% of the registered capital.

The second is the arbitrary surplus reserve. The discretionary surplus reserve is mainly withdrawn by the listed company in accordance with the resolution of the general meeting of shareholders. The difference between statutory surplus reserve and discretionary surplus reserve lies in the different basis for their respective accruals.

The former is extracted on the basis of national laws or administrative regulations; The latter is withdrawn at the discretion of the company.

Surplus reserve is owned by the owner.

project. Owner's equity refers to the residual equity enjoyed by the owner after deducting the liabilities of the enterprise's assets.

Owners' equity includes: paid-in capital (listed companies are in the share capital), capital reserve.

Surplus reserves, undistributed profits.

Surplus reserve refers to the surplus formed by the enterprise in the course of operation, which is partially set aside as the reserve fund for undistributed profits in accordance with the provisions of laws and regulations and the articles of association of the company. It is part of, but not the owner's equity of, the business. The following will explain the nature, function, and classification of surplus potato surplus reserve.

1. The nature of the surplus reserve.

Surplus reserve is a kind of financial system of an enterprise, which is a reserve fund formed by the retention of surplus formed by the enterprise in operation. Surplus reserve is a part of the undistributed profits of an enterprise and is a component of the owner's equity of the enterprise. However, surplus reserve is not the same as owner's equity, it is a form of owner's equity or hail-specific.

Second, the role of surplus reserves.

The surplus reserve has played a positive role in the development of the enterprise. First of all, the surplus reserve can be used to make up for the possible losses of the enterprise in the future operation and reduce the risk of the enterprise. Second, the surplus reserve can be used to expand the scale and scope of the enterprise, and fund the research and development, innovation and market expansion of the enterprise.

Finally, surplus reserve can enhance the capital strength and credibility of enterprises, and enhance the market competitiveness of enterprises.

3. Classification of surplus reserves.

Surplus reserves can be divided into various types depending on how they are formed and what they are used for, including the following:

1) Statutory surplus reserve. According to the Company Law, enterprises must set aside 10% of their net profits as statutory surplus reserve for future risk preparation and development. This kind of provident fund is something that the business must keep.

2) Arbitrary surplus reserves. Enterprises can set aside a part of their earnings as any surplus reserve for the development and expansion of the enterprise. This kind of provident fund is determined by the enterprise according to the actual situation.

3) Special surplus reserve. Enterprises can set up special surplus reserves according to actual needs for specific purposes, such as R&D, environmental protection, social responsibility, etc. This kind of provident fund is set up by the enterprise according to the actual needs.

To sum up, surplus reserve is a part of the undistributed profits of an enterprise and is a specific form of ownership equity of an enterprise. It can be used to make up for the possible losses of the enterprise in the future operation, expand the scale and scope of the enterprise, and enhance the capital strength and credibility of the enterprise. At the same time, surplus reserve can be divided into different types according to its formation method and purpose, such as statutory surplus reserve, arbitrary surplus reserve and special surplus reserve.

If the owner's equity is greater than the paid-in capital, it means that there is a balance in the capital reserve, the surplus reserve and the undistributed profit. In terms of content, the owner's equity is composed of four items: paid-in capital, capital reserve, surplus reserve, and undistributed profits, so the owner's equity is comprehensively affected by this account, which is the cumulative value of these four subjects over the years. Owner's equity refers to the residual equity that is deducted from liabilities by the owner, that is, the net amount of resources with future economic interests owned or controlled by an accounting entity in a certain period.

The accounting equation "assets-liabilities = owners' equity" clearly shows that owners' equity is essentially a residual equity, which is the difference between all assets of the enterprise and all liabilities, reflecting the property rights relationship of the enterprise.

The surplus reserve is not affected by the total owner's equity.

Owner's equity refers to the residual equity enjoyed by the owner after deducting liabilities from the assets of the enterprise.

Owners' equity includes: paid-in capital (share capital for listed companies), capital reserve, surplus reserve, and undistributed profits.

The accounting treatment of surplus reserve to make up for losses is debit: surplus reserve, credit: profit distribution - undistributed profits.

From the entries, it can be seen that the surplus is an internal change in the owner's equity, and the total owner's equity is unchanged.