1, to make up for the losses of previous years; (There is no need to make special accounting entries to make up for losses with profits)
2. Withdraw the statutory surplus reserve fund; (Surplus reserve is used to cover losses or increase capital; The public welfare fund can only be used for the collective welfare of employees)
3. Withdraw any surplus reserve;
4. Distribute dividends of preferred shares;
5. Distribute common stock dividends.
What remains is the undistributed profit at the end of the year.
The distributable profit refers to the profit that can be distributed by investors after deducting the statutory surplus reserve and public welfare fund. The profits available to investors shall be distributed in the following order:
Dividends payable on preferred shares. Withdraw any surplus reserve. Common stock dividends payable. Dividends on common stock converted into capital.
Net profit refers to the amount after deducting income tax from the total profit of the enterprise in the current period, that is, the after-tax profit of the enterprise. The calculation formula of net profit is: net profit = total profit ×( 1- income tax rate). Net profit is the final result of enterprise management. The more net profit, the better the operating efficiency of the enterprise. If the net profit is small, the operating efficiency of the enterprise will be poor, which is the main index to measure the operating efficiency of the enterprise. The income tax rate of enterprises is legal, and the higher the income tax rate, the less the net profit. There are two income tax rates in China. One is the income tax rate of 25% for general enterprises, that is, 25% of the total profits should be turned over to the state finance as tax; The other is the preferential tax rate for foreign-funded enterprises and some high-tech enterprises, and the income tax rate is 15%. When the operating conditions of enterprises are equivalent, the enterprises with lower income tax rate have better operating benefits.
legal ground
company law
Article 167 When distributing the after-tax profits of the current year, the company shall withdraw 10% of the profits and include it in the company's statutory reserve fund. If the accumulated amount of the statutory common reserve fund of the company is more than 50% of the registered capital of the company, it may not be withdrawn.
Before the company's statutory reserve fund is insufficient to make up for the losses in the previous year, the profits of the current year shall be used to make up for the losses.
Article 169 The company's common reserve fund is used to make up the company's losses, expand its production and operation or increase its capital. However, the capital reserve fund shall not be used to make up the company's losses.