3.Calculate Closing retained earnings of following information: Opening Retained earnings Rs. 20,000 Net profit for the year Rs. 40,000 Dividend paid Rs. 15,000 Profit transfer to sinking fund Rs. 6,000 Profit transfer to general reserve Rs. 14,000

The formula for closing retained earnings is:

$$\text{Closing Retained Earnings} = \text{Opening Retained Earnings} + \text{Net Profit for the year} - \text{Dividend paid} - \text{Profit transfer to sinking fund} - \text{Profit transfer to general reserve}$$

• Opening Retained earnings: Rs. 20,000
• Net profit for the year: Rs. 40,000
• Dividend paid: Rs. 15,000
• Profit transfer to sinking fund: Rs. 6,000
• Profit transfer to general reserve: Rs. 14,000

$$\text{Closing Retained Earnings} = \text{Rs. } 20,000 + \text{Rs. } 40,000 - \text{Rs. } 15,000 - \text{Rs. } 6,000 - \text{Rs. } 14,000$$

$$\text{Closing Retained Earnings} = \text{Rs. } 60,000 - \text{Rs. } 15,000 - \text{Rs. } 6,000 - \text{Rs. } 14,000$$ $$\text{Closing Retained Earnings} = \text{Rs. } 45,000 - \text{Rs. } 6,000 - \text{Rs. } 14,000$$ $$\text{Closing Retained Earnings} = \text{Rs. } 39,000 - \text{Rs. } 14,000$$ $$\text{Closing Retained Earnings} = \text{Rs. } 25,000$$

The closing retained earnings are:

$$\text{Rs. } 25,000$$