BS Accounts

I have created a General reserves balance sheet account to show money in the bank as a separate account by a journal entry from retained earnings to general reserves.

During the year we hold events in the P&L for members that make a loss and we need to use money from our general reserves.

How should this be managed in accounting terms, the P&L shows a loss because of the additional expenditure. and the reserves are now too high having been spent from the bank.

So logically I should use a journal entry to transfer a sum from general reserved to retained earnings.

Should I have a To account as an expense in the P&L and a from account as an income account?

However is these ar way of showing transfers between BS accounts in Manager reports


How do you determine the amount to be allocated to the General Reserves account from Retained Earnings.

Have a P&L Income account called - General Reserve Subsidy - and do a Journal from (debit) the reserve to (credit) the income accounts.

Conversely if we make a profit and ant to add this bank to the general reserves do we have an expense account called General Reserve contribution and journal (credit the reserve and debit the expense?


No, management would resolve to do a distribution from Retained Earning to General Reserve based on a criteria/policy which maybe different from the profit.

Generally, most non-profit organisation just allow their Retained Earning to rise & fall - a floating general reserve.

If your General Reserve is specifically setup to underwrite loss years then it would be more appropriate to call it - Profit Equalisation Reserve and the income account would be PE Reserve Subsidy.