Retained earnings are profits from earlier accounting periods that have not been distributed to the company's owners. At the end of your fiscal year, QuickBooks automatically transfers your profit (or loss) into an equity account named Retained Earnings.
If your fiscal year is January to December and you create a standard balance sheet on December 31st, QuickBooks shows your net income for the year on a line labeled “Net Income.” In this example, the net income for the year is $124,493.00:
Opening Bal Equity | 15,000.00 |
Owners Draws | -45,750.00 |
Owners Equity | 75,000.00 |
Retained Earnings | 0.00 |
Net Income | 124,493.00 |
Total Equity | 168,743.00 |
If you then create a standard balance sheet the next day on January 1st, the same net income from the previous year now appears in your Retained Earnings account, and net income for the new year has changed to 0.00:
Opening Bal Equity | 15,000.00 |
Owners Draws | -45,750.00 |
Owners Equity | 75,000.00 |
Retained Earnings | 124,493.00 |
Net Income | 0.00 |
Total Equity | 168,743.00 |