Assume a balance of $12 220 for retained profit at 30 June 2019. 

1. Explain what ‘retained profits’ represents.

2. For the year ended 30 June 2019, the company’s revenues were $101 160 and its expenses (including income tax) were $98 810. During the year ended 30 June 2019, the company declared dividends of $1200. What was the balance in retained profits at the beginning of that year (1 July 2019)? 

3. If the 2019 expenses were $116 000 instead of the figure in point 2, and the company did not declare any dividends, what would the retained profits be at 30 June 2019? How would you interpret this number?