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Understand the Retained Earnings account

This article provides general information about the Retained Earnings account

Detailed information

The Retained Earnings account tracks profits from earlier periods that have not been distributed to owners. It is an account that QuickBooks Desktop automatically creates when you first created your company file.

QuickBooks Desktop automatically transfers the prior year's net income/loss to retained earnings account every first day of each fiscal year. This entry does not require any adjustment and designed to recalculate every time you run a report

Since retained earnings is a special account, you cannot do the following with this account.

  • Merge Retained Earnings with another account.
  • Change the type of this account.
  • Create a sub account under retained earnings.
  • Make retained earnings a sub account of another account.
  • Create another equity account and make it act like Retained Earnings


QuickBooks Desktop will let you make entries to Retained Earnings, but it is advisable to set up alternative equity accounts

  • Previous Retained Earnings: To record an opening balance from your previous regime
  • Adjustments to Retained Earnings: Your accountant can use this account for adjustments that they have to make.
  • Dividends or Owner's Draw: Account to use when distributing profits.
Unexpected results
  • Previous year's net income does not roll over into Retained Earnings
    This is usually caused by Data Damage. To resolve this issue, you may need to refresh the account .
    1. Create a backup of your company file.
    2. Run Account Quick Report on Retained Earnings account. Move any entries other than Closing Entries to other accounts.
    3. Delete the retained Earnings account.
    4. Run a Balance Sheet report. QuickBooks Desktop will recreate the Retained Earnings account.
  • Net Income on Balance Sheet and Income Statement differ in cash or accrual reports
    1. From the Company menu, select 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 both reports have the same date range and the same report basis (accrual or cash).
  • Automatic posting to Retained Earnings does not match Net Income for previous year
    This may occur if you are viewing the Profit & Loss on cash basis and the retained earning postings on accrual basis. Please be sure that both reports are on the same report basis.
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4/27/2017 11:36:02 AM
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