Acca financial Accounting (FA) Study Text ac ca (FA)

Closing RE = prior year's RE figure +/– this year's profit/loss – dividends 

By working out the value of closing assets, liabilities and share capital (using a 

valuation exercise) we should be able to work out the retained earnings figure. If 

we know the previous year's retained earnings (from last year's statement of 

financial position) we should be left with the profit/loss for the year as the 

missing figure. 

 

 

Test your understanding 1 

 

The statement of Andy Carp Co at 31 December 20X8 shows the 

following balances: 

•

 

Non-current assets – $10,000 

•

 

Current assets – $3,400 

•

 

Share capital – $200 

•

 

Non-current liabilities – $2,100 

•

 

Current liabilities – $1,700 

The sales, purchases and expense records of Andy Carp Co has 

unfortunately been destroyed and the directors need help estimating the 

entity net profit for the year so that they can estimate its tax liability. The 

directors have informed you that the retained earnings of the entity at 

31 December 20X7 were $7,350.