A retained earnings appropriation is used to absorb a fire loss when an entity is self- insured provide for a contingent loss that is probable and measurable smooth periodic income restrict earnings available for dividends Which of the following is not a legal restriction related to profit distribution? The amount distributed must be in compliance with the laws governing corporations. The amount distributed can never exceed the net income reported for the year. Profit distribution must be formally approved by the board of directors. Dividends must be in full agreement with the capital contract as to preferences.