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jennylas
January 19, 2023
Question

Retained Earnings on Balance Sheet

  • January 19, 2023
  • 2 replies
  • 13 views

My YTD Balance sheet is showing a high number for retained earnings not reflective at all of last year’s PNL. I don’t really understand where this number is coming from. Does it just change to make up the difference between Liabilities and Equities vs Assets to make sure they same? At the moment, all my bank and cc accounts are reconciled until 2022 and equal what is currently in my bank and cc accounts. 

2 replies

Rustler
Rustler
Level 15
January 20, 2023

Retained Earnings, (RE) is last years net profit. Each year at the start, after all income tax adjustments are made, RE should be cleared to owner equity with a journal entry/
debit RE for the balance and credit owner equity for the same amount

During the year current year net profit is also posted to RE, this keeps the accounting equation in balance assets = liabilities + equity.

jennylasAuthor
January 20, 2023

Thank you! My CPA hasn’t really created any JE for that so maybe that is why it looks weird. This is the first time anyone has asked for a Balance Sheet. My S-Corp is just a pass through for my business with an employee of 1 (me). Is there a way to backfill this data for previous years to make my Balance Sheet look more accurate?

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