Did you Close Equity into Retained Earnings for last year?
At the end of each year, QuickBooks closes net income into Retained Earnings – yet Owner Draws or Shareholder Distributions need a Journal Entry to be adjusted.
I created a how-to video to explain how retained earnings and equity accounts work. 😊
Open Balance Report
- Go under “Business Overview”
- Choose “Balance Sheet”
- Choose “Date” Range
- Click “Run Report”
Profit and Loss – Income and Expense
Balance Sheet – Assets, Equity & Liabilities
Last Year, did you have any Owner Contribution/Distribution?
Net Income from last year will automatically move to Retained Earnings first day of the next year.
Sample Report Period:
Last Year – Dec. 31, 2020 – Net Income $91.25
Next Year – Jan. 1, 2021 – Retained Earnings $91.25
**QuickBooks naturally does the Retained Earnings**
Close Equity to Retained Earnings
- Go up to “+ New”
- Choose “Journal Entry”
- Choose the first day of the new year
- Choose Account: “Owner’s Equity: Draw”
- Add “Credit amount”
- Add in 2nd line: Retained Earnings
- Add “Debit amount”
**When Checking Balance Sheet Report (1st day of next year)
Draw is Zeroed out and the amount is moved to Retained Earnings (Negative amount)
Tip: If you are behind on your closing entries. Take a deep breath… You can go back and adjust your entries one year at a time.
Looking for the training on “How to Enter Depreciation Into QuickBooks”.
Have you been using QuickBooks for a while, but when you pull a report you just don’t understand what it’s saying?
Does the idea of going to see your tax professional sound a little stressful and maybe cause you to feel like you want to pull your hair out?
I would love for you to join me on my customizing QuickBooks workshop.
I’ll be sharing:
- The most efficient way to track your Income and Expenses.
- How to create accurate reports in order to view how your business is actually doing and stop second-guessing yourself.
- Where to get the data you need to make the best decisions to grow your business.
And the #1 SECRET to feeling Confident at your next tax appointment.
I’m excited to see you on the workshop!
I’d love to hear if this inspired an “aha moment” and if you are ready to close your Equity accounts. 👇