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The Retained Earnings account

In QuickBooks, Retained Earnings is a very, very special account. You can rename the Retained Earnings account, but you cannot:

  1. Delete Retained Earnings.
  2. Merge Retained Earnings.
  3. Change the type of Retained Earnings.
  4. Create sub accounts of Retained Earnings.
  5. Make Retained Earnings the sub account of another account.
  6. Create another equity account and make it act like Retained Earnings (although the Rebuild Data utility can do that if necessary).
Entries to Retained Earnings

Setting Up and  Adjusting Retained Earnings

When you set up a new company, QuickBooks automatically creates the Retained Earnings account. QuickBooks will let you make entries to Retained Earnings, but it is preferable to set up alternative equity accounts:

  • Previous Retained Earnings to record an opening balance from your previous regime.
  • Adjustments to Retained Earnings for adjustments that your accountant needs to make..
  • Dividends or Owner's Draw to distribute profits.
     

Rolling Over Net Income.

On the first day of each fiscal year, QuickBooks automatically transfers the prior year's net income/loss into Retained Earnings. Thus. you start each fiscal year with a zero net income. You do not need to make this entry as part of your routine closing entries. These entries are recalculated every time you run a report and can be calculated on either the cash basis or the accrual basis. You should not need to make any adjustements to these roll overs.

For more information on retained earnings, refer to Viewing the Retained Earnings account. and  view a retained earnings example from QuickBooks.

If this information does not answer your question, you can read discussions and post messages and questions relating to your issue on the Intuit QuickBooks Community site for free. You can contact an agent for additional guidance. Fees may apply.

Automatic posting to RE does not match Net Income for the previous year

When viewing closing entries to the Retained Earnings account, the amounts do not match the Net Income on the Profit and Loss report for that year. This may occur if you are viewing the Profit & Loss on the cash basis and the RE postings on the accrual basis. Please be sure that both reports are on the same basis.

Net Income on the Balance Sheet and Income Statement differ in cash or accrual reports

This can be caused by manually correcting the reports to reflect a Fiscal Year which is not in agreement with the one set in QuickBooks Company Information.

  1. Click Company > Company Information
  2. Change the field Fiscal Year to the same date as the first month used in the reports.

Note: If the Fiscal year information is correct, ensure that dates and choice of Cash or Accrual on the reports are in agreement.

KB ID# INF12328
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