The partners of Los Patitos, S.A. carry out a distribution of unsecured profits with a preliminary balance sheet as at 30 June. The profit corresponds to 100.00, which is distributed at 50% per partner. Net income is the actual return or profitability that partners or business owners derive from their contributions. This is what a company`s assets generated during the respective period. The legal reserve is an economy that the whole company must have, it is a percentage of the profit that must be discounted and that is not distributed among the partners. Legal reserves are such as support for businesses. In each country, your legal reserve may vary depending on the percentage set by law or government. In El Salvador, the legal reserve is 7% and in order to recognize the level of a company`s legal reserve, the declaration of results must be made, known as a declaration of economic performance or declaration of profit and loss. The legal reserve was created with the aim of enabling companies to ensure economic stability. This reserve is used to compensate for losses if the company does not have other reserves for this purpose. There are different types of reservations: legal, legal, voluntary lasa and tacita or hidden. To learn more about the legal reserve, we must consult the legal bases and find them in the Income Tax Act in the “Other deductions section of Article 31”.

The legal reserve is calculated before you know the income tax as it can be 25% or 30%, depending on the profit you have in this income statement. With the above, the net profit for the year is equal to 250.00, the assumption for the reserve would be based on 250.00, which is false. Therefore, the legal reserve is based on the profits made over the years, it is calculated according to the amortization of the corresponding contributions to civil servants, administrators, etc., the social and other costs of the activity, as well as©financial and commercial expenses and expenses. Perhaps one of the most practical examples is to observe how the legal reserve behaves within a company: in the first case, the profit is net, since all related expenses, including income tax, have been deducted. In the second case, SRI has not yet been determined. The tax is set as a percentage of 25% on the public service, for this example the SRI is 87.50. The net result for the year was 262.50. A legal reserve is the amount of assets that the company stores by taking a small percentage of its net capital and adding it to the previous values to generate a share capital that serves as support in the event that a financial problem arises throughout the annual production. In my opinion, the legal reserve is the part of the funds raised that commercial banks must deposit with the Bank of Mexico.

It is part of a bank`s available assets that cannot be used. Their purpose is to protect depositors. Financial statements are means of communication used by enterprises to report on economic and financial changes they experience at a given time or period. The annual financial statements concentrate the information obtained from the financial statements and classify it according to the generally accepted accounting principles to be determined: The actual situation and value of the company The result of commercial activities at a certain time The annual financial statements are presented as follows: Balance sheet Profit and loss account Statement of changes in equity Statement of capital flowsIt is also said that the law Reserves Discuss, analyze, clarify doubts or, in the best case, reaffirm knowledge of this accounting aspect. This is a very important question because, depending on the country, as well as the type of enterprise to be analysed, it is the type of % that should be applied and the minimum amount that should be set for this reserve. We can say that they are considered the book value of the appropriation or retention of profits, they are profits made by the company but not distributed. Depending on the result of € 10,000, at least € 1,000 must go into the legal reserve and the rest into voluntary reservations or other items. Then, this legal reserve is affected if the company does not cover the compulsory expenses that it must respect, so that the legal reserve is finally used so that the company does not have problems of a legal or institutional nature. The same Article 36 of the Commercial Code stipulates that at least five percent (5%) must be separated each year to form the legal reserve, the above gives an open letter to companies that if they need to separate a higher percentage, they can do so without prejudice to the laws. This can be beneficial as a kind of savings and that they have a very specific scheme to deal with complex situations in the future. Finally, keep in mind that taxes are paid on the tax profit and not on the accounting profit, so it is likely that the tax profit is higher than the accounting profit that generates a higher tax.

Net profit means the resulting profit after deduction and addition of operating profit, expenses or non-operating profit, taxes and legal reserve. The reservations thus justified may have several purposes. The most important is the calculation of losses©, negative balance sheets and assets due. They are usually used when the share capital is severely depreciated. The legal reserve is a type of regulation in some companies that is used in commercial law as a legal guarantee for the activities and operations carried out by the company, in case it cannot be held responsible for it or must compensate its creditors for defaults or other economic and financial liabilities. In this example, the accumulated reserve is equal to 20% of the paid-up capital. What the trading code indicates is that this amount can be capitalized. Then the excess legal reserve becomes part of the paid-up capital. For me, the secular reserve is: it is the protection of the capital of the company against possible losses.

Companies cannot freely dispose of these reserves or use them for whatever they want, but their only purpose is to respond to losses. It is important to note that legal reserves are legally created and prescribed elements, that is, they do not depend on the will of the employee. The latter may not refuse to set up such reserves, nor dispose of the money according to its interests, the mechanism being governed by specific rules. The legal reserve favors the company and creditors, because the increase in assets creates greater solvency and credit for the company. The legal obligation of reserve is that which is established by law, which must establish a legal provision of a general nature, whether ordinary or special, and consists of capital or savings that must be made by companies or joint-stock companies with the applicable regulations of our country according to their capital. The legal reserve is used to compensate for losses, it can be said that it is part of the profit that a company in question has made and that has not been distributed, since its clear objective is both to self-finance this company and to increase the value it can have, and it must also be taken into account, only if the legal reserve has exceeded the legal minimum limit, as long as the laws do not prevent an upper limit and even if they prevent it, to the extent that it exceeds it, the surplus is considered a voluntary freely available reserve. The purpose of the legal reserve is therefore to protect the share capital from possible losses. Companies cannot freely dispose of these reserves or use them for whatever they want, but their only purpose is to respond to losses. It is important to note that legal reserves are elements created and prescribed by law, that is, they do not depend on the will of the entrepreneur. The latter cannot refuse to build up such reserves, nor is he allowed to dispose of the money according to his interests, since the mechanism is governed by specific provisions The statutory reserve can be capitalized annually at the excess of five percent (5%) if the annual legal reserve exceeds fifteen percent (15%) of the capital paid up at the end of the previous year.