Profit and Loss accounts are referred to as “transitory accounts.”
At the end of each fiscal year, QuickBooks Online will automatically zero out Income and Expense accounts and transfer the net amount (the Net Income or Loss) to the Retained Earnings account on the Balance Sheet. This allows the new year’s Net Income account to begin to accumulate new totals for the new year's profits.
Note: If your Profit & Loss report is totally or partially blank, it may be set to run for this year-to-date or this calendar-year-to-date. If today’s date is January 10th, then the report is only capturing the last 10 days of transactions. Be sure to set the correct date range for your previous fiscal year.
Retained Earnings is a special Equity account that tracks your company's net worth, accumulated over previous fiscal years.
At the end of your fiscal year, QuickBooks Online automatically transfers your net profit (or net loss) to Retained Earnings.
There is no actual transaction that takes place. Net Income (income minus expenses) from the previous year moves into the Retained Earnings account.
To find out how it was calculated, simply run a Profit & Loss report from the previous fiscal year.
Note: You'll notice that your Balance Sheet has an account near the bottom called Retained Earnings. This amount normally stays the same over the course of your fiscal year. However, when you run your Balance Sheet report at the beginning of a new year (dated as of the new year), the amount in the Retained Earnings account will be different.