[Anonymous]

Hello everyone,

I am working on some simulation questions about Earnings and Profits and I am confused about this concept.

I did some research and I just want to confirm is it correct to say if current E&P is similar to book income?

Regarding book income, what items we subtract and add in book income calculation?

For example, is state tax refund add or subtract in book income?

Thank you so much.

[Anonymous]

I may be wrong, but I think we would be better off referring to E&P as Retained Earnings.

[RIST]

I actually like thinking of E&P as Cash Flows. The actual facts support this, however, the whole E&P going into AE&P is like retained earnings, it's just that the accounting treatments that hit E&P approximate cash flows.

So it is like a Cash based R/E.

But really E&P isn't heavily tested in terms of details, that is why they don't go into the accounting treatments. They are messy.

[Author]

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