ICAEW AF · Chapter 13 · Question 5 of 12
A company's retained earnings were £145,000 at the start of the year. Profit for the year was £62,300, dividends paid were £24,000, and £3,000 was transferred from the revaluation surplus to retained earnings for excess depreciation. What are the retained earnings at the end of the year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) £186,300
Explanation
Closing retained earnings = opening £145,000 + profit £62,300 - dividends £24,000 + transfer from revaluation surplus £3,000 = £186,300. The transfer moves the realised part of the surplus into retained earnings; it does not pass through profit or loss.
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