Retained earnings are the source of internal financing in Quickbooks. Because when a company doesn’t distribute its net income of fiscal year amongst shareholders. And reinvest this money into the business then it’s called retained earnings. If you want to understand what has retained earnings in Quickbooks.
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Definition Of Retained Earnings
When a company doesn’t distribute its net income amongst shareholders. Or keep some portion of net income to reinvest in the business. Then it’s called retained earnings (Source of internal finance) in accounting terms. To understand what is retain earnings in Quickbooks. Let’s take an example…
Suppose you went to a car showroom, where you liked a Hyundai car. But it’s out of your budget. So what will you do, you will start saving a part of your salary into a bank. And when you will save lots of money. Then you will buy that Hyundai car.
Similarly, at the company end of each year, the company earned profit. And keep some portion of the profit for future use, or reinvest in the company it’s called retained earnings.
However, most of Quickbooks user doesn’t know, how to calculate retained earnings in Quickbooks. Because Quickbooks automatically does this process. But you should know the formula for calculating retained earnings.
Formula For Calculating Retained Earnings In Quickbooks
Previous earnings or retained earnings are calculated by adding net income to retained earnings (or subtracting net loss) and then subtracting any net dividends paid to shareholders.
Retained Earning formula, and can be calculated as below
RE= BP + Net Income -C – S
BP= Beginning period RE
C= Cash Dividends
S= Stock Dividends
Retained Earning Example: Suppose Oxford pvt.ltd. has $700,000 of net profit in its fiscal year. And he has paid $100,000 for the dividend. And it has a beginning earning balance of $1,400,000. Then we can get its retained earning by this formula:
RE =BP+Net income-C-S
RE= $1,400,000 + $700,000-$100,000
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How To Get Statement of Retained Earnings Accounts in Quickbooks
Quickbooks you cant directly see details of retained account by clicking on it in the balance sheet. Because retained earnings show your previous year’s income statement (P&L report). Quickbooks has the facility to automatically add the net income from the previous financial year into the company balance sheet as retained earnings. It’s necessary to show your retained earning statement in public. Because it helps shareholders to get the exact financial position of your firm. So that they can invest more money into the firm. Example of the Retained earnings statement
But if you want to see details of Retained Earnings, then you have to open the previous year’s income statement.
View The Profit & Loss Detail Report
First, you will need to check your P&L account to see net income. So let’s see its details.
- Open Quickbooks and click on Reports
- Now search Profit & Loss report and click on it
- Then you have to select All Dates from the Report Period drop-down list
- After that click on the Run Report
- Now you need to click on Net Income amount to see an income statement detail report for all dates.
So you have seen steps of getting details of profit and loss. It will show all the transaction that occurs in the income statements. That is automatically recorded in your retained earning account by the Quickbooks online software.
Get The Income statement (P&L) By Year
As you know retained earning is such a kind of previous year earning. Then if you want to track all of your retained earning year-wise then follow the below steps.
- Open your Quickbooks software and click on the Report
- Now select the Profit and loss report
- You can see the P&L window open in front of you, now click on Customize.
- After that select Rows/ columns item to open the section
- Now select Years from the Columns drop-down list.
- After that select Run report.
Now, this process helps you to import year by year amount of net profit. That transferred to retained earning account by Quickbooks. And if you see any difference between current Retained earnings amount and income statement amount. Then view the account Quick report to understand well.
Review the Retained Earnings account Quick Report
Sometimes Quickbooks user gets retained earning amount different from the income statement report. Then in this situation, you will need to check the Quick report. So let’s see Quick Report.
- Open your Quickbooks and click on the Gear button
- Then click on the Chart of Accounts
- Then you will see Retained Earning account click on it
- Now select the Run Report from the Action dropdown menu
- After that select, All Dates from the Report Period drop-down list
- Then you have to select the Run Report.
As you have seen what has retained earnings in Quickbooks. And you have also seen the formula for calculating retained earning. So Quickbooks is good for your small business. Because Quickbooks did some tasks automatically. As here Quickbooks automatically transfer its net income to retained earnings account. So there is no need to calculate retained earnings manually. For more information, you can contact Quickbook ProAdvisor.