The retained earnings in QuickBooks shows the profit and loss of the previous financial year. the retained earnings are automatically filled from your previous account here to the new accounting year as the active your balance.
In your balance sheet, if the amount of the current year as total assets is equal to the amount of the liability in the balance sheet then the retained earnings will be zero for your whole year.
Many people make sure that they Zero out retained earnings in QuickBooks to start a new fiscal year with a net-zero income. so for this, there are many things that you might require to do. All the things are mentioned in this article. This makes you work easier to perform the steps according to the thing.
- If you have retained earnings account then check the expense account
- Steps to Adjust & Zero Out the Retained Earnings into Your QuickBooks Account?
- What are the steps to enter the retained earnings into your QuickBooks account?
- How the Closing Income Summary can be organized?
- What are the ways to close the Opening Balance Equity account from your QuickBooks account?
- What is the formula of retained earnings so that you can easily zero out retained earnings in QuickBooks?
- What if I want to turn off the retained earnings update at the year-end to zero out retained earnings in QuickBooks?
- Can retained earnings be negative because of which you may have to zero out retained earnings in QuickBooks?
If you have retained earnings account then check the expense account
You have to check your expense account if the retained earning in QuickBooks are incorrect.
For this, the steps are mentioned here:-
- Open the QuickBooks Desktop software
- Click on the Gear icon that is on the top left side of the screen
- Then select the option Chart of Accounts
- Now search for the Income Summary
- If this option is not available then you have to Add an Expense account
- After that, you have to add the owner’s equity account as to be Retained Earning account
- Go to the Profit and Loss account report or the Income Statement account
- You have to apply the filter for your profit and loss account as a fiscal period to continue
- After this, you have to review all revenue and expense account properly
- Click on the new journal entry window to create a new journal entry to your account
- now you have to mention the date for the last day of the account that is the closing date
- Again, go to the profit and loss account
- Click on All Revenues and All the Debit amounts
- Go to the last line of the entry
- From the last line, you have to select the Income Summary account that you created above
- Now the total of all revenue accounts needs to be credited to it
- Now click on the Save and Close button and you are done.
Steps to Adjust & Zero Out the Retained Earnings into Your QuickBooks Account?
When a new closing date occurs then the retained earnings automatically got updated.
To adjust your retained earnings into your QuickBooks account you have to follow the steps given below:-
Total Time: 10 minutes
Open the QuickBooks into your Windows system
Then click on the Edit menu option
You have to select the Preferences option from the drop-down Menu
Go to the Accounting option and then select it
Select the tab named Company Preferences
Click on the date or password from the company preferences tab
When you’re all set then you have to mention the closing date and password
In the open up dialogue box, you have to confirm the changes that you have done
You are all set by adjusting retained earnings into your QuickBooks account.
What are the steps to enter the retained earnings into your QuickBooks account?
- In QuickBooks, click on the create + icon
- Select the option Journal Entry to create a new one
- Now, you have to adjust the refer date that matches the opening balance date
- Search for the account column and then go to the first line of the account
- Click on the Retained Earnings
- In the credits column, mention the amount of the balance
- After that, go to the second line
- Enter the amount that you are accessing for creating the balance
- Now mention the amount in the column named debit
- Click on the Save button and then the Close button when you are done.
How the Closing Income Summary can be organized?
- First of all, create a new journal entry with the date of the last closing period
- Then in the income summary account, you have to debit or credit the net income amount
- If you have less revenue and more expenses then the amount needs to be debit
- If you have less profit than the expenses then you have to credit it
- Now click on the retained earning amount and then you have to match credit and debit to your income summary report
- In the end, click on the Save and Close button.
What are the ways to close the Opening Balance Equity account from your QuickBooks account?
- In the QuickBooks account, search for the profit and loss report or income statement
- Then apply the filter to the income statement report to the fiscal period closing out
- After applying the filter, you have to make a note of the opening balance
- Search for the new journal entry window
- Using this window, create a new journal entry by providing the last day of the closing period date
- Then open the income statement
- Click on the opening balance equity account
- After that, create a debit account
- You have to continue with the last line of the entry as you have to choose the Income Summary account
- Create the credit for all opening balance equity accounts
- Then click on the Save and Close button when you are all set
- Check and verify that all the calculations that you are doing are correct to zero out of equity or opening balance account.
What is the formula of retained earnings so that you can easily zero out retained earnings in QuickBooks?
The formula for retained earnings is as follows:-
Retained Earnings (RE) = Beginning Period RE + Net Income / Loss – Cash Dividends – Stock Dividends.
What if I want to turn off the retained earnings update at the year-end to zero out retained earnings in QuickBooks?
To turn off retained earnings update to next year the steps are mentioned here:-
1. In QuickBooks, click on the Reports menu
2. Select or enter the details of the transaction by account
3. Choose the option Customize
4. You have to filter the Date
5. Then fill in the other details under the Rows or Columns
6. Click on the Run Report button.
Can retained earnings be negative because of which you may have to zero out retained earnings in QuickBooks?
Yes, the retained earnings can be negative when total net earnings minus the cumulative dividends. This creates a negative balance in the account of retained earnings. This shows the company losses of long terms so you may be required to zero out retained earnings in QuickBooks.