Any accountant out there?
is it a deduction in retained earnings? What if there's no retained
earning? For instance a newly established corporation.
Answer:
If it is a new company and there is no retained earnings to offset the loss, then you will show the amount as a negative balance with the title Retained Deficit.
Also, if you are showing a Statement of Equity (or Statement of Income and Equity), be sure to label the Retained Earnings section as a Retained Deficit as well.
When there is enough profit to reverse the deficit, change the name back to Retained Earnings.
losses are generally taken out of gross profits if any..if there are no earnings then the loss will be treated as accrued and / or accumulated loss which will be taken from subsequent profits.
If there is no retained earnings, I suggest you reflect it under Accumulated Loss, under the Stockholder's Equity, as a negative amount, to reflect the Networth of the company.
When Net income will be incurred in the next fiscal year, Retained Earnings will be set-up up, thus the negative Accumulated Loss becomes a Net Loss Carry-Over.to be deducted or offset from the Retained Earnings.
Lisamae9 is correct. Retained Earnings will have a deficit.
You offset it with goodwill for an asset, a lot of it.
Then you depreciate it rapidly to offset your losses.
Isn't it great? And so simple.
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