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Bajadreamer
Level 2

End of year Equity-is a GJ needed to move to offset income?

I started my current year with a negative opening balance equity from prior year 2020.  When I close current year 2021, since I have a profit will QB automatically adjust the 2022 opening balance equity to accomodate the difference or do I need to manually create a GJ to offset the balance.

 

For example:

2020 starting equity balance was ($10,000)

2021 Net Income $20,000

2022 starting equity balance now $10,000

or do I need a a GJ to reduce my 2021 income by $10,000 with the offset of the equity to net me a 2022 starting equity of $10,000


Solved
Best answer May 29, 2021

Best Answers
Rustler
Level 15

End of year Equity-is a GJ needed to move to offset income?

This is one of those maybe answers that QB is so famous for

 

If you have a retained earnings account in the chart of accounts, yes you need to use a journal entry, debit RE and credit equity

 

If there is not a retained earnings account, it means QB is using that account as equity and will post to it automatically.  This only happens for those who have elected sole proprietor

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2 Comments 2
Rustler
Level 15

End of year Equity-is a GJ needed to move to offset income?

This is one of those maybe answers that QB is so famous for

 

If you have a retained earnings account in the chart of accounts, yes you need to use a journal entry, debit RE and credit equity

 

If there is not a retained earnings account, it means QB is using that account as equity and will post to it automatically.  This only happens for those who have elected sole proprietor

Bajadreamer
Level 2

End of year Equity-is a GJ needed to move to offset income?

I do have a retained earnings account.  So at EOY I'll do a GJ to move all my earnings to equity.

Thanks

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