Appropriated Retained Earnings
What are Appropriated Retained Earnings?
An appropriated retained earnings account is an equity account containing money set aside for a future project.
How it Works
Retained earnings are the accumulation of profits that have been earned to date.
Whenever a business makes a net profit, that profit is transferred to retained earnings
This money can be left in retained earnings.
Or alternatively, some or all of it can be dispersed to shareholders.
Sometimes, though, a company will have plans for a major project.
One way to fund such projects is by using money held in retained earnings.
To prepare for this, the company may want to set some of its retained earnings aside.
So they will transfer money from retained earnings to appropriated retained earnings.
To record the transfer, you debit the retained earnings account.
Then you credit the appropriated retained earnings account.
As with other transfers, the normal came from/went to flow doesn’t apply to this transfer.