Why should the losses incurred by the enterprise be made up for by surplus reserves?

Hello, I am an accounting qualification teacher, your question:

Surplus reserve: surplus: the meaning of making money, surplus, is the meaning of staying, reserve:

It is the meaning of public accumulation, which together is the public accumulation left behind by making money. If you lose money, you can only make up for it with the money you earned before, and you can't make up for it with capital reserves. Why?

For example: Zhang San lost 100,000 yuan when he opened a store, and at this time, his mother invested 500,000 yuan in Zhang San. Can Zhang San tell his father that he made 400,000 this year?

Clearly inappropriate. That is to say, what is invested is invested, and what is earned is earned, and it cannot be confused. Therefore, Zhang San lost 100,000 yuan, and he could only make up for the loss with the previous earnings, and could not use his mother's investment money to make up for the loss.

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The concept of surplus reserve is originally to accumulate valley for disaster prevention, don't spend it all when you make money, save a little in the company, and when you lose money, you can make up for the shortfall, so when the loss occurs, you should use the surplus reserve to make up for it.

The surplus reserve is the accumulation of profits from previous years, and it is natural to use it to cover losses.

It was originally a disaster prevention in Sekiya.

When the company incurs a loss, it shall be made up by the company itself. There are three main ways to make up for losses:

The first is to make up for it with the pre-tax profit of the following year. According to the current system, when a company incurs a loss, it can make up for it with the pre-tax profit realized in the next five years, that is, the period for the pre-tax profit to make up for the loss is five years.

The second is to make up for it with the after-tax profit of the following year. If the company's losses have not been fully made up after five years, the profits after the income tax is applied to the unmade losses.

The third is to make up for losses with surplus reserves. When the company uses the surplus reserve withdrawn to make up for the loss, it shall be proposed by the board of directors of the company and approved by the general meeting of shareholders. When an enterprise uses surplus reserves to make up for its losses, it shall make up for the losses in the current period on time.

Borrow: Surplus Reserve General Surplus Reserve.

Goods: Profit distribution Surplus reserve transferred in.

1. When an enterprise uses surplus reserves to make up for losses, accounting entries:

1. When an enterprise uses surplus reserves to make up for losses:

Borrow: surplus reserve.

Credit: Profit Distribution - Surplus Reserve to Make Up for Deficit.

2. When carrying forward the surplus reserve at the end of the year to make up for the loss:

Borrow: Profit distribution - surplus reserve to make up for losses.

Credit: Profit Distribution - Undistributed Profits.

2. If there is still a loss in the following years, or even if the profit is still not made up, the surplus reserve can be considered to make up for the loss; Surplus reserve is the accumulation of previous net profits, the purpose of enterprise accumulation is to cope with future difficulties and crises, so surplus reserve is mainly used to make up for losses, distribute dividends and increase capital, when surplus reserves make up for losses, surplus reserves will be reduced, and unmade losses will be reduced.

1.Example 11-25: In 2004, ABC Company used 800,000 yuan of arbitrary surplus reserve to make up for the loss of the previous year. Make the following accounting entries:

1) Recorded in the "profit distribution - other transfers" sub-ledger.

Debit: Surplus Reserve 11 Arbitrary Surplus Reserve 800000 Credit: Profit Distribution 11 Others transferred to 800000

2) Carry forward the detailed account of "profit distribution - undistributed profits".

Debit: Profit distribution - one by one other transferred to 800,000

Credit: Profit distribution - undistributed profit 800,000

2.Example 11-26: Company H, a foreign-invested enterprise, was approved to make up for its losses in 2004 with reserves of 100,000 yuan. Make the following accounting entries:

1) Recorded in the "profit distribution - other transfers" sub-ledger.

Debit: Surplus reserve 100,000 reserves**100,000

Credit: Profit distribution one by one other transferred to 100,000

2) Carry forward the detailed account of "profit distribution - undistributed profits".

Debit: Profit distribution one by one other transferred to 100,000

Credit: Profit distribution - 100,000 undistributed profits

Accounting entries are also known as "accounting formulas". Abbreviated as "entries". It is based on the principle of double-entry accounting, and lists the corresponding accounts of both parties and their amounts for each economic transaction.

How to write accounting entries for covering losses with surplus reserves.

Borrow: surplus reserve.

Credit: Profit Distribution - Surplus Reserve to Make Up for Deficit.

Borrow: Profit distribution - surplus reserve to make up for losses.

Credit: Profit Distribution - Undistributed Profits.

Method: Accounting entry chromatography.

Tomography refers to a method of solving problems that divides the development process of things into several stages and levels, and analyzes them layer by layer, so as to finally obtain results. The use of tomography to compile accounting entries is intuitive and clear, and the ideal teaching effect can be obtained, and the steps are as follows:

1. Analyze and list the accounting subjects involved in economic business.

2. Analyze the nature of accounting accounts, such as asset accounts, liability accounts, etc.

3. Analyze the increase and decrease of the amount of each accounting account.

4. According to the steps, the direction of the accounting account is judged in combination with the economic content (increase or decrease) reflected by the borrower and borrower of various accounts.

5. Prepare accounting entries according to the bookkeeping rules that there must be loans and loans must be equal.

This method is very effective for students to know exactly the accounting subjects involved in the accounting business, and is more suitable for the preparation of individual accounting entries.

Accounting entries business chain method.

The so-called business chain method refers to the formation of a continuous business chain according to the sequence of accounting business, and the preparation of pure return of accounting entries between the accounting entries before and after the business.

This method is more effective for continuous economic business, especially for the direction of bookkeeping that is easy to be mistaken.

Accounting entries bookkeeping rules method.

The so-called bookkeeping rule method refers to the use of bookkeeping rules "there must be a loan, and the loan must be equal" to prepare accounting entries.

In the process of business development, a certain proportion of surplus reserve will generally be withdrawn from after-tax profits at the end of the year, and how should accounts be made when the surplus reserve is used to make up for losses?

Accounting treatment of surplus reserves to cover losses.

When an enterprise uses surplus reserves to make up for losses:

Borrow: surplus reserve.

Credit: Profit Distribution - Surplus Reserve to Make Up for Deficit.

When the surplus reserve is carried forward at the end of the year to cover the loss:

Borrow: Profit distribution - surplus reserve to make up for losses.

Credit: Profit Distribution - Undistributed Profit Loss.

How to account for the withdrawal of surplus reserves from after-tax profits?

1. When accruing:

Borrow: Profit Distribution - Withdrawal of Statutory Surplus Reserve.

Credit: Surplus Reserve – Statutory Surplus Reserve.

2. When carrying over:

Debit: Profit distribution - undistributed profits.

Credit: Profit Distribution – Withdrawal of Statutory Surplus Reserve.

3. It can also be simplified to:

Debit: Profit distribution - undistributed profits.

Credit: Surplus Reserve – Statutory Surplus Reserve.

Borrow: Profit distribution.

Credit: Surplus Reserve.

The proportion of the statutory surplus reserve to be withdrawn.

Generally, in accordance with the relevant provisions of the Company Law or the financial system, the statutory surplus reserve shall be withdrawn according to 10% of the after-tax profit, and if the cumulative amount of the statutory surplus reserve has reached 50% of the registered capital, it may not be withdrawn.

The role of surplus reserves.

The surplus reserve is mainly used to make up for losses, increase capital and distribute dividends.

Covering losses, mainly annual pre-tax and after-tax profits;

If the company wants to convert the surplus reserve into capital, it must be approved by the resolution of the general meeting of shareholders;

In the distribution of dividends, it should be noted that if the enterprise has no profits, it is not empty to observe the dividends that can be distributed.

Surplus reserve to make up for losses refers to the use of surplus reserve funds to make up for the losses of enterprises. Surplus provident fund includes statutory provident fund and optional provident fund. The company's surplus reserve fund can be used to cover losses, expand the company's operations and increase share capital.

Surplus reserve belongs to the owner's equity account, and from the balance sheet, the assets plus liabilities of the enterprise are equal to the equity. From the perspective of corporate management, enterprises use these assets (from creditor input and shareholder investment) to produce and operate and create profits. The realized operating profits, first pay the interest owed to creditors, and then pay income tax, one part of the after-tax profits retained by the enterprise to form the company's surplus reserve and undistributed profits, and the other part is distributed to shareholders in the form of dividends (called dividends for listed companies).

When the company has after-tax profits, according to the law, it needs to withdraw the statutory reserve fund according to 10% of the after-tax profits, of course, if the cumulative amount of the statutory reserve fund withdrawn by the enterprise has exceeded 50% of the company's registered capital, it does not need to be withdrawn.

In addition to withdrawing the statutory provident fund, the company can withdraw any provident fund at its own discretion, and there is no statutory requirement for the discretionary provident fund, whether to withdraw it, and how much to withdraw, the company decides at its discretion.

When an enterprise has a loss, the first consideration is to use the pre-tax profit of the following year to make up for the loss, under normal circumstances, the tax law allows the maximum deficit period not to exceed 5 years, the 5 years is a continuous year of the concept, but for some high-tech enterprises and technology-based small and medium-sized enterprises have a certain extension, here will not be too much description. Then consider the after-tax profit to make up the deficit or the surplus reserve to make up the loss.

When an enterprise uses surplus reserves to make up for losses, the accounting entries involved are:

Borrow: surplus reserve.

Credit: Profit Distribution - Surplus Reserve to Make Up for Deficit.

Year-end loan: profit distribution - surplus reserve to make up for losses.

Credit: Profit Distribution - Undistributed Profits.

From the entries, it can be seen that the surplus reserve is only the conversion of the internal accounts of the owner's equity, and the total owner's equity has not changed.

In addition to making up for losses, the surplus reserve can also expand the company's operations, such as investing in plant construction, purchasing equipment, etc.; At the same time, it can also be converted into equity capital, and the conversion between the owner's equity will only affect the internal structure of the owner, and the share capital or paid-in capital will increase, and the retained earnings will decrease.

The meaning of using surplus reserve to make up for losses is that 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.

When an enterprise incurs a loss, it should be made up by the enterprise itself. When an enterprise uses surplus reserves to make up for its losses, it shall make up for its losses in the current period according to the amount of the losses.

There are three main forms of deficit compensation:

1. Enterprises set up special provident fund to make up for losses: enterprises establish special provident fund, and deposit the part of the realized profit beyond the specified provident fund ratio into the provident fund for the company's business activities and investment expansion;

2. Provident fund construction to make up for losses: the part of the realized profit exceeding the specified provident fund ratio will be deposited into the provident fund construction account set up by the enterprise for equipment transformation and technological renewal of the enterprise;

3. Cash deficit compensation: The part of the profit realized by the enterprise that exceeds the prescribed reserve fund ratio shall be deposited into the deficit compensation account set up by the enterprise for strengthening the cash process management and repaying debts.

Surplus reserve is a means for enterprises to reinvest profits beyond the required capital and provident fund ratio, which can not only ensure the operation and development of enterprises, but also enhance the financial protection of enterprises, which is an effective means of financial management.

When an enterprise incurs a loss, it should be made up by the enterprise itself. There are three main ways to make up for losses:

1. Make up for it with the pre-tax profit of the following year. According to the current system, when an enterprise incurs a loss, it can make up for it with the pre-tax profit realized in the next five years, that is, the period for the pre-tax profit to make up for the loss is five years.

2. Make up for it with the after-tax profit of the following year. The losses incurred by an enterprise refer to the profits that have not been made up in full after the five-year period and the losses that have not been made up after the application of income tax.

3. Make up for losses with surplus reserves. When an enterprise uses the surplus reserves withdrawn to make up for its losses, it shall be proposed by the board of directors of the company and approved by the general meeting of shareholders.

To sum up, the policy of making up for deficits from surplus reserves and establishing financial transfer payments to enterprises other than provident funds can promote the development of enterprises, increase their financial disposable funds, and thus improve the financial strength of enterprises. In addition, this can also promote economic development, protect corporate assets, reduce financial risks, replenish financial funds in a timely manner, and ensure the normal operation of enterprises.

Legal basis]:

Article 57 of the Company Law of the People's Republic of China.

The establishment and organization of a one-person limited liability company shall be governed by the provisions of this section; Where there are no provisions in this section, the provisions of Sections 1 and 2 of this chapter apply.

The term "one-person limited liability company" as used in this Law refers to a limited liability company with only one natural person shareholder or one legal person shareholder.