Many users need help with several issues when they attempt to zero out retained earnings in QuickBooks Online accounting software. For this users require expert guidance to manage the whole process and avoid all the possible errors. In this blog, we will go through you the steps of how to Zero Out retained earnings In QuickBooks. We will also learn about the requirements, and how to proceed or enter, adjustments.
What are Retained Earnings?
Whenever closing user accounting books, there are always closing entries, which are made at the end of the financial year to transfer the balance from the income and expense accounts to retained earnings. Its main objective is to zero out users’ income and expense accounts and add financial year net income to retained earnings.
QB’s retained earnings are the same as an equity account that describes the past year’s business expenses in terms of profit and loss. Before the start of the new accounting period, QuickBooks automatically adds the previous year’s net income into the current year’s balance sheet as the retained earnings.
What is Zero-Out Retained Earnings in QuickBooks Application?
QuickBooks accounting software automatically sends the amount that is pending into the retained earnings account. There is no requirement to close the retained earnings in a user’s QuickBooks account. It will automatically get restored after the specific closing date.
What is the Requirement of Zero Out Retained Earnings in QuickBooks?
Retained earnings in QB play a very important role in business because it gives easy access to the data of the last accounting period which tells all the transaction details. Users can also create and compare the reports of last year and the current financial year.
How to View Retained Earnings in QB?
Users have to generate a balance sheet report to view retained earnings in QuickBooks. This QB online accounting software automatically updates the retained earnings in the account balance. It shows all the details of business earnings as well as expenses.
Bookkeepers can show Profit & Loss reports in QB and retained earnings. For this, you have to follow these steps:
- Open QB, then go to the Business Overview section.
- See the Reports tab and click on it.
- Find and select the Profit and Loss report.
- At the report, find the drop-down menu for selecting the report period and choose All Dates from the options.
- Click Run Report and create the Profit and Loss report.
- Click Net Income (the user can see the detailed net income amount) and it shows the Profit and Loss Detail report for all dates.
- This Profit and loss report shows all the transactions. QB automatically stores these transactions in a retained earnings account.
How to Enter Zero Out Retained Earnings in QuickBooks?
Below are some steps to enter the zero-out retained earnings in QB accounts:
Step 1: Choose the create + icon in the QB software.
Step 2: Select the Journal Entry option to create a new one.
Step 3: Now mention the date so that the opening balance date can be matched.
Step 4: Locate the account column. Now, navigate to the first line of the account.
Step 5: Press on the Retained Earnings option.
Step 6: Below the credits column, fill in the balance amount.
Step 7: Later on, go to the second line and then enter the amount for access to create the balance.
Step 8: Enter the amount under the debit column.
Step 9: Click on the Save button and then press the Close option of the tab.
You can also read Zero Out Payroll Liabilities in QuickBooks.
How to Adjust Retained Earnings in QuickBooks?
Sometimes, users find irregularities between the retained earnings and the current fiscal year’s statement. For this, the users need to check out the transactions in the journal reports or the general ledger to clear them out. Additionally, some undisclosed numbers on your financial reports may ultimately lead you to incorrect accounts. To edit and correct it, your only option is to adjust the transaction in the general ledger or journal report.
How to Zero Out Retained Earnings in QuickBooks Software?
Mentioned below are the important steps to zero out retained earnings in the QB accounting application. Users should not skip any steps to avoid all the errors in the process.
Step 1: Select the QuickBooks Account and navigate to the Edit option.
Step 2: Select Preferences and then go to the Accounting Section.
Step 3: Choose the Company Preferences tab.
Step 4: Afterward, select the Set Date or Password option.
Step 5: In the following window, look for a Closing date.
Step 6: Closing Date password can be entered and then verified in the box.
Step 7: Select OK to close the opened window. Then, proceed to select the Save and Close option to save the changes.
How to Proceed if the QuickBooks Retained Earnings are Wrong?
A bookkeeper can rectify all errors made at the time of preparing financial statements of the last year. For the sorting of these errors, users can adjust the current period’s retained earnings account. For example, two years ago, users accidentally increased their annual sales. To correct it, debit the overstated amount from the revenue account and credit it to the opening balance of the current period’s retained earnings account.
For the intention of reflecting the accurate financial status of the company, this entry reduces revenue and retained earnings. The users have to check their expense accounts to see if the retained earnings are wrong in the QuickBooks account.
Here are some important steps that are listed below.
Step 1: Launch the QuickBooks software.
Step 2: Now, click on the Gear icon in QuickBooks application which is available on the top left side of the screen, and choose Charts of Accounts.
Step 3: Search for Income Summary.
Step 4: If this option is not available, then Add an Expense account.
Step 5: Later on, add the owner’s equity account as a Retained Earnings account.
Step 6: Now, search the Profit and Loss account report or the Income Statement account.
Step 7: Users can apply the filter for profit and loss accounts for a financial period.
Step 8: Move forward, and verify all revenue and expense accounts.
Step 9: Choose the New Journal Entry window to make a new journal entry to your account.
Step 10: Moreover, enter the closing date of the account and again navigate to the Profit and Loss account.
Step 11: Now select all Revenues and Debit amounts.
Step 12: At the end of the entry, users have to opt for the Income Summary account that was created recently and mention the total revenue accounts.
Step 13: At the last step, click the Save option and then the Close button.
Conclusion
Zero out retained earnings in QuickBooks is an essential feature of business accounting. It is important and safe to keep Reports and accounting financial records accurate and up-to-date. Hope the above-given information is useful for you to get rid of how to Zero Out Retained earnings In QuickBooks problem. But, if you are still facing any kind of issues then feel free to get in touch with the QB Enterprise support center.
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