QuickBooks Online determines the classification of transactions (restricted, unrestricted, or retained earnings) based on how you set up your Chart of Accounts and use specific tracking features like Classes.
Your operating account is a "bucket" for cash. QuickBooks doesn't automatically identify restricted transactions, so you must manually assign a class to each check, bill, or deposit. Leaving these fields blank will prevent accurate fund separation in financial reports.
Retained Earnings, however, works differently. This is a system-generated account that QuickBooks manages automatically. At the end of each fiscal year, the software rolls your total net income into retained earnings to clear your books for the new year.
Since every organization has unique reporting needs, it is important to consult an accountant about the proper mapping of your chart of accounts. They can help you identify the correct account types and the specific level of detail required to ensure your financial records are accurate.
If you have more questions or concerns, feel free to leave a comment below. We'd be glad to provide the necessary information.
