Retained Earnings

It's nice to see you in the Community, Younan.

I can see how vital it is for your company to zero out retained earnings to start the fiscal year with a net zero income. Allow me to direct you to the appropriate support that can guide you on how to properly handle this matter.

 The retained earnings account allows you to monitor the capital available for your business expenses. Clearing the account gives you convenient access to information from past accounting periods, including transaction details.

In situations like this, I recommend reaching out to your accountant for further guidance. They can offer advice on the best way to correct the amount and provide methods to resolve the issue.

In the event that you need to make a journal entry and set up an account for debit or credit purposes, the following resources will offer a comprehensive overview of the entire process:

• Add, edit, or delete accounts in QuickBooks Desktop
• Create a journal entry in QuickBooks Desktop for Windows or Mac
  
  

I've provided a range of resources for you to explore. Each link below contains valuable information on closing your books and setting a password, as well as tasks to prepare for the year-end season. Feel free to click on any of the links to view the complete details:

• Year-end guide for QuickBooks Desktop
• Set or change the closing date and password in QuickBooks Desktop
• Close your books in QuickBooks Desktop
  
  

Should you have any additional queries regarding managing your retained earnings information or if you need any further assistance with QuickBooks, please feel free to let me know. I'm always ready to offer the help and support you require. Have a fantastic day, Younan.

Hi, thank you for your answer but I don't have anyone to help correct that , what I need is how to make the Retained Earnings to be Zero as of 1/1/2024 , What I should do ?

I can't do JE for that account and can't movie it anywhere , it must be zero .

Thank you 

@Younan 

What type of business is this (sole proprietorship, S-Corp, etc.)?  Why do you think it should be $0?  Retained Earnings (R/E) should carry forward on your balance sheet from year to year.  You only close it out if you're moving it to another equity account or you have taken it out of the business.  

The money is already recorded as income , it was a mistake from the previous bookkeeping , there is no equity , I am trying to correct it but I can't apply it to any account  

@Younan 

If this is a sole proprietorship, you close Retained Earnings to the Owner’s Capital equity account.  If this is anything other than an S-corp, please advise. 

@Younan 

Edit:  If this is anything other than a sole proprietorship, please advise. 

@Younan 

Also, if there is no equity in the business, then the entries that recorded the equity reduction should offset the balance in Retained Earnings and can be closed to each other.  Presumably, you’re aware that last year’s net income closes to Retained Earnings as of Jan. 1 each year. 

Can I do JE and use " undeposited Funds" as of 12/31/2023 ? What I want is not o show the Retained Earnings in the trail balance report , if there is a way to remove it from the report it will be good .

thanks for helping

@Younan 

Why would you want to move RE off your trial balance?  If you want to properly reclassify it, I can assist with that.  Moving RE to UF would create a negative UF balance and is obviously a bogus entry.  You should  contact your own CPA/tax accountant for further guidance if you're attempting to make a bogus entry. 

hi, how to reclassify that ? I really don't want to see it in trial report 

@Younan 

What type of business?  S-Corp, sole proprietorship or ???

We have an s-corp and my understanding is that with our type of entity there shouldn't be retained earnings left over since the profit or loss automatically gets transferred to the shareholders K-1, is this a proper assumption? If so can you tell me what I need to do in order to zero out retained earnings/owners equity, especially how to do that if we had a loss for the year, thank you.

@Art_Evo 

"We have an s-corp and my understanding is that with our type of entity there shouldn't be retained earnings left over since the profit or loss automatically gets transferred to the shareholders K-1, is this a proper assumption?"

That's an incorrect assumption.  Business income gets reported on your K-1, but that's independent of whether or not you actually take that out of the business.  For instance, say you have $100K in business income reported on your K-1 and you didn't make any distributions of that income. That $100K sits in Retained Earnings (RE) until you take it out of the business in the form of a distribution to shareholders or you report a net loss.  If you have a net loss, that reduces your RE balance.  The only way it gets zeroed out is if you take distributions in the amount of RE.  The only proper way to zero out RE is to make distributions in that amount.      

However, you should be aware that RE is not the same as your tax basis in the S-Corp.  Your tax basis is the amount that you can distribute tax-free because you already reported that amount on your K-1s.