ACCOUNTING FOR RETAINED EARNINGS/ACCUMULATED PROFITS

Retained Earnings
Net loss of the period Net income for the period

Appropriation for treasury shares,

Reversal of appropriation
contingencies, and etc.

Dividend declaration

Need for Appropriation

1. By law
When the company acquires its own shares, the necessary entry to record such
appropriation would be:

Retained Earnings

Appropriations for Treasury Shares

2. By contract
When there is a need to retain with the business assets needed for the retirement of
bonds, the necessary entry would be:

Retained Earnings

Appropriations for Bond Sinking Fund

3. By decision of the Board of Directors
When there is a plan for plant expansion, the necessary entry would be:

Retained Earnings

Appropriations for Plant Expansion

Reversal of Appropriations
When appropriation is no longer needed such as when treasure shares are sold and plant
expansion projects have been completed, the reversal of appropriations must be recorded.

Appropriations for Treasury Shares

Retained Earnings

Appropriations for Plant Expansion

Retained Earnings