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niko16
September 13, 2022
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Manually creating prior year's retained earnings

  • September 13, 2022
  • 2 replies
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Hi there,

 

My company started using quickbooks in 2022, but we imported our transactions for the prior year (2021). After getting everything categorized for the previous year (2021), we want to close that year correctly. Should I manually move the income and expenses to retained earnings with a J/E?

 

It seems that at the end of this year (2022), the retained earnings account will update automatically. Was 2021 retained earnings not updated automatically because we were already in the next year when we started entering 2021?

 

I will elaborate as needed. Thanks!

 

15 min. later update: on the 2022 balance sheet, I see that my retained earnings account has a balance - it is equal to the net income(loss) for 2021. However, when I look at my chart of accounts, the register for my retained earnings account is completely empty for all dates. How could this be if it shows up on the balance sheet? FYI, the 2021 retained earnings number on the balance sheet is not "clickable" - it won't link to any ledger entry like the other numbers do.

Best answer by Rainflurry

@niko16 

 

Is that what you mean to correct when you say Retained Earnings doesn't have a ledger?  Yes, I use ledger/register as interchangeable terms.  Sorry about that. 

 

Nevertheless, when I open the Retained Earnings "report" and select "all dates", there are no entries, it is empty. Does this mean that I need to manually enter the retained earnings amount for 2021?  No, if it's showing properly on your balance sheet, all is well.  The year-end close, where QB closes net income to RE is not shown on that report or anywhere else for that matter.  It's essentially an invisible transaction in QB. 

2 replies

Rainflurry
Rainflurry
September 13, 2022

@niko16 

 

"...when I look at my chart of accounts, the register for my retained earnings account is completely empty for all dates. How could this be if it shows up on the balance sheet? FYI, the 2021 retained earnings number on the balance sheet is not "clickable" - it won't link to any ledger entry like the other numbers do."

 

That is normal.  Retained earnings (RE) in QBO does not have a ledger like the other accounts.  You can still run a Quick Report to see the entries that you have posted to RE.

N
niko16Author
September 13, 2022

@Rainflurry 

 

Thanks,

I noticed now that in the chart of accounts, Retained Earnings has a "report", not a "register" (my mistake calling it a register in my first post). Is that what you mean to correct when you say Retained Earnings doesn't have a ledger?

 

Nevertheless, when I open the Retained Earnings "report" and select "all dates", there are no entries, it is empty. Does this mean that I need to manually enter the retained earnings amount for 2021?

Rainflurry
RainflurryAnswer
September 15, 2022

@niko16 

 

Is that what you mean to correct when you say Retained Earnings doesn't have a ledger?  Yes, I use ledger/register as interchangeable terms.  Sorry about that. 

 

Nevertheless, when I open the Retained Earnings "report" and select "all dates", there are no entries, it is empty. Does this mean that I need to manually enter the retained earnings amount for 2021?  No, if it's showing properly on your balance sheet, all is well.  The year-end close, where QB closes net income to RE is not shown on that report or anywhere else for that matter.  It's essentially an invisible transaction in QB. 

    A
    AbegailS_
    September 13, 2022

    Hi there, @niko16. 

     

    I'd be glad to provide clarification on Retained Earnings.

     

    The Retained Earnings account is made up of the total of a company's income and expenses from previous years. When a fiscal year begins, QuickBooks Online will automatically add whatever the net income was from the previous fiscal year to the Retained Earnings account on the Balance Sheet.

     

    You can run a Profit and Loss report for the previous year to see what makes up this account. Here's how:

     

    1. Select Reports on the left navigation menu.
    2. Enter Profit and Loss in the Reports search box and click it.
    3. Click on the Report period down-down list and choose Last Year.
    4. Select Run Report.
    5. Click the Net Income amount which will open up the Profit and Loss Detail report.

    Check this article to learn more about Retained earnings in QBO: How to view Retained Earnings account details.

     

    You'll want to review your closing date and ensure the accounting method is correct when running the report.

     

    Also, I recommend reaching out to your accountant, so they can provide additional options on how to adjust the amount. This way, you can ensure your books are accurate.

     

    For future reference, you can also run different kinds of reports in QuickBooks Online: Run Reports In QuickBooks Online.

     

    If there's anything else I can help you with, please let me know. I'd be happy to get back to you and provide additional assistance. Have a good day.

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    FoxnFig
    June 9, 2023

    Hi,

    I'm trying to do the same thing - load prior year balance sheet & P&L for reporting purposes. How did you go about getting the Net Income amount on the balance sheet to Retained Earnings?

    I have loaded the prior year balances via a journal.

     

    Thanks!

    Nicole.

    Rainflurry
    Rainflurry
    June 10, 2023

    @FoxnFig 

     

    How did you go about getting the Net Income amount on the balance sheet to Retained Earnings?

     

    QB makes that entry automatically as of the first day of your next fiscal year.  For example, if your fiscal year-end is Dec. 31 and you run a Dec. 31 balance sheet, your net income for the year will be shown as Net income under the equity section.  If you run a Jan. 1 balance sheet (one day later), the previous year's Net income amount will now be listed under Retained earnings in the equity section.

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