Remainder

accounting

The remainder, in accounting, is a concept referred to a sum of money valued as benefits from a previous period to which an accounting application or destination has not yet been assigned.

In the day-to-day accounting of all types of companies, the appearance of an accounting remnant is common. In these situations we speak of benefits in a provisional situation and waiting to be directed or assigned to another item, either in the form of distribution or destined for a possible reinvestment.

As with remnants in the field of industry or production, something remnant is understood as something surplus or residual that was previously not counted. In accounting, therefore, this way of understanding these excess amounts is used.

Usual appearance of carryover in accounting

This type of remaining items is more common when closing an accounting period and settling the corresponding accounts. In that sense, it is common to be able to have a remainder at the close of fiscal periods by a company.

Once the corresponding tax obligations of the territory in which the company is located or operates have been fulfilled, the situation may arise that it detects an amount of funds resulting from its activity in the form of profit after taxes.

Alternatives for awarding a remainder

Faced with the achievement of accounting surpluses, commercial companies often have different possibilities for the aforementioned reallocation of the same in the following accounting period:

  • Voluntary reserves by the company in accounts assigned for such cases or in the specific “Remnant”.
  • Distribution of profits between shareholders or owners.
  • Reinvestment or undertaking of new business projects.

The existence of this type of accounting-type concept is more common in large companies that have a greater amount of resources, especially if it is common for them to generate a high level of economic or financial benefit.

However, this type of monetary surplus is not usually large amounts in proportional terms for a company.

Alternatively, the Anglo-Saxon term remainder is used for its name, especially in sectors or multinational companies.

In the case of public companies or the administration, it is usual as a treasury surplus. In this area, it is a way to assess the solvency of said organization and its ability to pay based on its resources. In the case of municipalities, it is used to undertake new public works or pay service providers.

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