If your company's profit distribution-undistributed profit has a credit balance, which is greater than this year's loss, you don't need to use surplus reserve to make up for the loss. Just do the first step you mentioned, that is,

Borrow: profit distribution-undistributed profit

Loan: this year's profit distribution-undistributed profit is a debit balance, which can be made up by surplus reserve (taxed). Therefore, losses that exceed pre-tax compensation are generally compensated by surplus reserves.

Borrow: surplus reserves

Distribution of loan profits-undistributed profits

Note: If your company pays income tax according to sales, you can use surplus reserves to make up for losses. The entries are as follows:

Debit: profit distribution-undistributed profit

Credit: current year's profit

Debit: surplus reserve

Credit: profit distribution-undistributed profit

Extended information:

There are two basic methods to allow loss carry-forward:

1. Allow carry-forward before and after

. If the profits of the previous year cannot be fully offset, they can be carried forward and made up with the profits of the future years, and the taxable income of the future years can be reduced accordingly. Countries that adopt this method, such as Canada, stipulate that it should be transferred for three years and then transferred for seven years; The United States stipulates that it will be transferred for three years before and five years after; Indonesia is five years before and eight years after.

2. Only backward carry-over is allowed

Countries that adopt this method, such as Argentina, stipulate that it will be carried over for 1 years and France, Brazil and Thailand stipulate that it will be carried over for 5 years; Britain, New Zealand and Singapore stipulate that it can be carried forward indefinitely. The advantage of this method is that it can avoid the formalities of tax refund, which is beneficial to the national fiscal revenue. However, the enterprise will still bear the tax of the previous year in the case of losses, and if it closes down due to losses, it will not be able to get the tax that should be reduced if the losses are carried forward. Therefore, compared with the two methods, the first method is more reasonable. The current income tax law of China stipulates that taxpayers' annual losses can be made up by the income of the next tax year; If the income in the next tax year is insufficient to make up for it, it can be made up year by year, but the longest period shall not exceed 5 years. Therefore, China tax law adopts the second method, that is, the enterprise losses are carried forward for five years.

References: loss carry-forward-Baidu Encyclopedia