Reply to: Cash in account does not = retained profit figure

[Jonny1974]

Lol

Current assets minus current liabilities. Working capital measures how much in liquid assets a company has available to build its business. The number can be positive or negative, depending on how much debt the company is carrying. In general, companies that have a lot of working capital will be more successful since they can expand and improve their operations. Companies with negative working capital may lack the funds necessary for growth. also called net current assets or current capital.

Thank you for all of your patient replies..I'm still waiting to hear from my accountants. Once I do I'll let you know the outcome.

[JamJarST]

Working what now?

Lol

Current assets minus current liabilities. Working capital measures how much in liquid assets a company has available to build its business. The number can be positive or negative, depending on how much debt the company is carrying. In general, companies that have a lot of working capital will be more successful since they can expand and improve their operations. Companies with negative working capital may lack the funds necessary for growth. also called net current assets or current capital.

[Jonny1974]

Good. Now all you need is a basic understanding of working capital and you will be a financial whizz

Working what now?

[JamJarST]

But even without buying a basic bookkeeping book I understand that retained profit is after CT has been applied

Good. Now all you need is a basic understanding of working capital and you will be a financial whizz

[zedAccounts]

Hi there,

I have just asked my accountant for a retained profit figure to date as I need to draw a larger than normal dividend.

However, as the subject field surmises my account balance is a lot lower than the figure supplied to me today.

My 2009-2010 accounts are close to completion, and my accountants have my entire year's bank statements. Indeed they are sent to them monthly. All dividends have been declared and none have gone unnoticed by my accountants.

Can anyone explain this?

The difference will generally come from debtors (e.g. unpaid invoices) and creditors (e.g. unpaid tax); your bank account will exclude the former and include the latter. Retained profit will be the other way round.

ZED.

[Jonny1974]

Yep theoretically the retained earnings is available for dividends, but it may not be made up of liquid assets, you will have working capital other than cash. You would have to realise the value of your net working capital first before you could release all of retained earnings.

But even without buying a basic bookkeeping book I understand that retained profit is after CT has been applied

[JamJarST]

And here's me thinking retained profit is profit available to be declared as dividends...

Yep theoretically the retained earnings is available for dividends, but it may not be made up of liquid assets, you will have working capital other than cash. You would have to realise the value of your net working capital first before you could release all of retained earnings.

[SueEllen]

I still have the spreadsheet from SJD, so maybe I'll start filling it in and use it to compare with what my accountants send through in their monthly statement.

You need to complete it by going through your bank statements and expenses statements.

[SueEllen]

And here's me thinking retained profit is profit available to be declared as dividends...

Retained profit/retained earnings

[Jonny1974]

Yep. Agreed - check everything yourself anyway. Wouldnt believe some of the basic mistakes my last accountant made (got rid of him now!)

I still have the spreadsheet from SJD, so maybe I'll start filling it in and use it to compare with what my accountants send through in their monthly statement.

[Jonny1974]

You obviously have outsatinding liabilities, most notably CT, still to pay. I would be very surprised if the retained earnings of a company still trading was the same as the bank balance. I would heartily recommend getting a book or going on a course to learn about basic accounting and how to read a balance sheet.

And here's me thinking retained profit is profit available to be declared as dividends...

[psychocandy]

I agree with the SueEllen way of thinking "Also do your own bookkeeping even if you are paying the accountant to do it for you as well", partly because I want to be in full control of my company and partly because I don't trust the accountants to not make a mess of it when I'm ultimately responsible for it.

I suppose there is no reason why a decent accountant can't do the books for you every month and send you the results so you can see that it balances against the bank statement. It's when they don't update it for a few months that questions like this arise and cause stressful situations.

Give them a chance to look at the books and sort it out - I'm sure it's not going to be a big deal to figure out what went wrong.

Yep. Agreed - check everything yourself anyway. Wouldnt believe some of the basic mistakes my last accountant made (got rid of him now!)

[JamJarST]

My thoughts exactly - they must balance but there's a 30K gap appearing somewhere.

I'll see what they come back with today.

Only assets are laptop and printer, no outstanding invoices.

You obviously have outsatinding liabilities, most notably CT, still to pay. I would be very surprised if the retained earnings of a company still trading was the same as the bank balance. I would heartily recommend getting a book or going on a course to learn about basic accounting and how to read a balance sheet.

[Wanderer]

I was with SJD but the spreadsheet although good was only as good as the effort put into it!! I changed accountants because I needed a more hands on service, and have been happy...until now!

I agree with the SueEllen way of thinking "Also do your own bookkeeping even if you are paying the accountant to do it for you as well", partly because I want to be in full control of my company and partly because I don't trust the accountants to not make a mess of it when I'm ultimately responsible for it.

I suppose there is no reason why a decent accountant can't do the books for you every month and send you the results so you can see that it balances against the bank statement. It's when they don't update it for a few months that questions like this arise and cause stressful situations.

Give them a chance to look at the books and sort it out - I'm sure it's not going to be a big deal to figure out what went wrong.

[Jonny1974]

My thoughts exactly - they must balance but there's a 30K gap appearing somewhere.

I'll see what they come back with today.

Only assets are laptop and printer, no outstanding invoices.