USA Preceding year negative balance and current year E&P


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If a company has a negative balance from a preceding year (i.e., a net operating loss), should the current year earnings & profits include an offset to bring that negative balance back to 0 or positive? For example, if the company from 2018 had a balance/loss of -$2000, and in 2019 the company had E&P of $5000, should that $5000 be offset to $3000 to cover the negative balance from 2018? Thanks
 
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kirby

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should the current year earnings & profits include an offset to bring that negative balance back to 0 or positive? No.
The retained earnings account in the balance sheet will act in the way you are thinking: the loss from the prior year will be netted with the current year gain.
 
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so will the current year e&p be calculated from this net amount? or is it separate from the prior year loss
 

kirby

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The current year e&p is separate from the prior year loss.
 
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kirby

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I have to say this: a first year high school acctg student would know the answer to what you asked. I am concerned by your other posts where you are filing corporate tax returns. Please consider hiring an enrolled agent and if there is no time to do do then file extensions. "Above all, do no harm"
 

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