Why retained earnings is empty, but shows in report

dropshipping · ‎January 31, 2019

Hello,

When I run a balance sheet report for last year I see retained earnings. I cannot click on it to see what it is made of.
Also, it is blank when I go to chart of accounts and click "run report" for retained earnings, and select last year.

How come it does not show what this number is made of ?

qbteachmt · ‎January 31, 2019

@dropshipping

These are Different, and let's examine how and why: "However, my net profit for 2018 shows 100k
And retained earnings in balance sheet for 2018 shows 3k

For both reports I run date: 1/1/18 - 31/12/18"

And this is not stated quite right: "I can understand the net profit should match retained earnings."

RE comes from Net Income.

You run the P&L for your date range and see the Net income value at the very bottom. For that same As Of Date for that fiscal year end, you see this same value in Net Income as contributing to Equity. Not in Retained Earnings, but still part of Equity. It's not until the First Date of the New Fiscal Year, that this amount seen from Net income "rolls" into RE for the first date of the new year, so that Income and Expense can start over at zero on that first date of the new fiscal year.

RE does not have a register view; it does not carry a balance in the chart of accounts. You Run Reports, to see the info.

Example:

Your First year of business, Net Income ends at $10,000, and for Dec 31, 2017. Run the same report on Jan 1, 2018, having no Financial activity on Jan 1, and now you see Net Income on the Balance Sheet is 0, and the $10,000 from last year is the RE value. it "rolled over" to be RE. Retained. Earnings.

End the second year the same way. That means on Dec 31, 2018, RE is $10,000 and Net Income from 2018 operations is $10,000. On Jan 1, 2019, Net Income is 0 (no business activity has taken place yet this year). RE = $20,000.

All of this assume you never took out any equity, either. All of this is part of Equity. It doesn't matter how you slice and dice Equity, for Clarity. It all contributes to Equity. This is the Accounting Formula for why that is called a Balance Sheet = it is In Balance:

Assets = Liabilities + Equity

View solution in original post

David-212915 · ‎January 31, 2019

Nice to have you in the Community again, @dropshipping. I can provide clarification on Retained Earnings.

The Retained Earnings account is made up of the total of a company's income and expenses from previous years. When a fiscal year begins, QuickBooks Online will automatically add whatever the net income was from the previous fiscal year to the Retained Earnings account on the Balance Sheet.

Given the nature of how this is a rollover account of all previous fiscal years' net profit or loss, a user is unable to click Retained Earning on the Balance Sheet to view details. If this is the company's second year of business, you will need to run a Profit and Loss report for the previous year to see what makes up this account. Here's how:

Select Reports on the left navigation menu.
Enter Profit and Loss in the Reports search box and click it.
Click on the Report period down-down list and choose Last Year.
Select Run Report.
Click the Net Income amount which will open up the Profit and Loss Detail report.

The following is a brief video to serve as a visual reference:

For additional information on this, including other reporting options for looking at Retained Earnings, I recommend the following article: How to View Retained Earnings Account Details.

That'll do it. I'm confident this information will help to get you on the right track.

Should you have any questions or need anything, please don't hesitate to let me know by posting a comment below. Hoping this response finds you with a smile.

dropshipping · ‎January 31, 2019

I can understand the net profit should match retained earnings. Also I see the same reflects in the video(low quality, im not sure)?

However, my net profit for 2018 shows 100k
And retained earnings in balance sheet for 2018 shows 3k

For both reports I run date: 1/1/18 - 31/12/18

David-212915 · ‎January 31, 2019

Hello again, @dropshipping. I want narrow down where the numbers on the report are originating from.

Additionally, thanks for providing the clarification about the numbers on the report, as well as the dates. Since the amount that's added will come from the end of a fiscal year, does your business' fiscal year follow the calendar year? If you're unsure, here's how you can check:

Select the Gear icon.
Choose Account and Settings.
Click Advanced on the left.
The Accounting section contains the option for First month of the fiscal year.

I've included a screenshot to serve as a visual aid:

Also, just to clarify, are you running the Profit and Loss report for the exact same date as the Balance Sheet? Since Retained Earnings will come from the previous year's Net Income, could you please try running the Balance Sheet for 1/1/2019.

I'll keep an eye out for your reply and look forward to providing additional assistance. Best regards.

qbteachmt · ‎January 31, 2019