Assume a balance of $12 220 for retained profit at 30 June 2022.

1 Explain what ‘retained profits’ represents.

2 For the year ended 30 June 2022, the company’s revenues were $101 160 and its expenses (including income tax) were $98 810. During the year ended 30 June 2022, the company declared dividends of

$1200. What was the balance in retained profits at the beginning of that year (1 July 2021)?

3 For the year ending 30 June 2023, the company made a loss of $20 000 and decided there would be no dividends paid for that year. Calculate the retained profits at 30 June 2023. How would you interpret this number?