The purpose of any economic activity isundestributed profits. This is quite natural, because its availability means an increase in the company's own capital, which allows for more and more large transactions and, consequently, leads to an increase in revenues in the future.
The balance on this account, as well as on any other, can be negative and positive - it all depends on the proceeds of the debit and the credit of this account.
The loan reflects the company's net profit,and in the debit - dividends, these two articles mainly affect how the retained earnings will be. This, however, does not at all mean that it is an asset of the company, and its accumulation rather indicates that the funds received as a result of profitable activity were reinvested in production.
Consider an example in which an enterprise in 2012year earned 500 thousand rubles, paid in the form of dividends 300 thousand rubles. and invested in the production of 200 thousand rubles. Suppose that 400 thousand rubles. - this is the previous year's undistributed profit, this allows us to draw up a report on the distribution of net profit for 2012.
Do not need to be great mathematicians tounderstand that the retained earnings of the reporting year amounted to 400 thousand rubles. In the future, the shareholders' meeting can choose independently how to dispose of it for the benefit of the enterprise.
Undistributed profit at the beginning of 2011
Balance of retained earnings at the end of 2012