Question

the process of accumulating corporate profits and their utilization in business​

Answer 1

Answer:

Accumulated earnings and profits (E&P) is an accounting term applicable to stockholders of corporations. Accumulated earnings and profits are a company's net profits after paying dividends to the stockholders, serving as a measure of the economic ability of a corporation to pay such cash distributions.

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Answer 2

Answer:

The money that is left over after businesses pay dividends to their shareholders is referred to as accumulated profit, also known as retained earnings. The amount is included in a company's balance sheet; more precisely, it is included in the shareholder equity section.

Explanation :

• The accounting term "accumulated earnings and profits" (E&P) refers to corporate stockholders.
• A measure of a company's financial capacity to make such cash transfers is its accumulated earnings and profits, which are its net profits after paying dividends to stockholders.
• After distributing dividends, a company's net profits are available as accumulated earnings and profits (E&P).

• E&P at the start of the year + current E&P less dividends to shareholders during the current period are used to get this number.

• Technically, retained earnings are distinct from accumulated E&P because E&P affects a company's capacity to pay dividends.
• Items like tax-exempt income or nondeductible expenses, which play a role in income tax reporting, must be added back to or deducted from the E&P account since it is used as a gauge of a company's ability to pay distributions.
• For tax departments within a firm, calculating E&P annually is laborious work, but it is crucial to keep records up to date because they are relevant to many corporate operations.
• For instance, before a C corporation conversion to a real estate investment trust (REIT) is permitted to move forward, a detailed accounting review of accumulated E&P is required.

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