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Transfer to retained earnings

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Transfer to retained earnings

  • This topic has 3 replies, 2 voices, and was last updated 9 months ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • September 21, 2021 at 10:06 am #636112
    ty0311
    • Topics: 17
    • Replies: 4
    • ☆

    Hi Chris,

    Enjoying your lectures so far!

    I just finished watching your SOCE lecture as part of chapter 3 FR. As I am not too familiar with SOCE, could you please shed some light on what should be reported in the ‘Transfer to retained earnings’ row? There is also no explanation in the notes.

    From the pro forma, it seems that there is a positive impact to retained earnings and a negative impact to the revaluation surplus.

    Very much appreciated in advance!

    Regards,
    Tim

    September 21, 2021 at 7:43 pm #636167
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6119
    • ☆☆☆☆☆

    Hi Tim,

    Glad that you’re enjoying the lectures so far and welcome to the forum.

    The transfer is for the excess depreciation that is now being charged following the revaluation. So, if we previously charged 10,000 before the revaluation and now we charge 15,000 following the revaluation then the excess is the 5,000.

    This 5,000 would appear as a reduction to the revaluation surplus and an increase in retained earnings.

    Thanks

    September 23, 2021 at 7:19 am #636346
    ty0311
    • Topics: 17
    • Replies: 4
    • ☆

    Thank you for the explanation sir.

    So as we credit retained earnings and debit revaluation surplus by the same amount (of $5,000 in your example), does it also mean that the net impact of this transfer for the excess depreciation to the total equity is 0? And if this is correct, then can I assume that this is the reason why it is not a requirement for companies to report their SOCE with this line?

    Thanks again!

    Regards,
    Tim

    September 25, 2021 at 8:54 am #636444
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6119
    • ☆☆☆☆☆

    Hi,

    Your debit/credit entry above is correct and the point about the net effect on equity being zero too. However, companies would show it within the SOCIE in the published accounts.

    Thanks

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