Thanks, that solution worked for the net income by year. I'm still super uncomfortable with the fact that there's an account that I can't actually see, but I guess that's just unavoidable with Quickbooks.
... View more
So I've recently started handling bookkeeping for a small business owner, and the owner complained that he was having problems with a negative Owner's Equity even though he was sure he was making a profit. So I spent a while going through several years of records, making sure that everything was properly recorded since his Quickbooks had a habit of matching customer payments to invoices randomly and recording duplicates of certain expenses, and yes, he had a positive net income. He had been paying himself with regular bank transfers, under an Owner's Draw account that was a sub-account of Owner's Equity, but the payments were less than the income from operations, so it didn't seem right that Owner's Equity was negative - I know that at the end of the accounting cycle (which he has set to a year) the revenue and expense accounts and everything should be closed out to net income, and net income to retained earnings, and retained earnings into Owner's Equity. It appeared that nobody had ever done this before, so I looked online to figure out how to set up a net income account (since QB makes you choose whether it's an income or equity account) and found that supposedly, Quickbooks automatically does all of this and transfers it into Owner's Equity at the end of the year. But the more I looked, the more clear it is that it hasn't been happening. I looked at the Owner's Equity account and there are no transfers into it or any of the sub-accounts other than the opening balance a few years ago. I went back and found Retained Earnings on the balance sheet, and sure enough, it was the right amount for the net income for literally the entire time he'd been in business - shouldn't it only be the net income for year to date? And then it got even weirder: I tried to run a report for Retained Earnings for all dates, but no transactions at all showed up - nothing in, nothing out, even though I expect that there should be regular entries to record the net income that's going into the account, and also an entry on December 31st of every year to record that it's closed out to Owner's Equity. I thought of doing it all manually with journal entries in and out of the retained earnings account, but the problem with that is that since, somehow, the net income is being credited to retained earnings, doing that would be duplicating everything. I suppose it's technically possible to only journalize the transactions from retained earnings to equity, but I really, REALLY don't like the idea of trying to journalize transactions involving an account that I can't even see! So how in the world can I fix this? I'm looking through all the help topics I can find, but since all of the answers are "Quickbooks does it automatically" I've found absolutely nothing that explains how to fix it when Quickbooks DOESN'T do it automatically.
... View more