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. 😊
Are you ready to close out your Owner's Draws, Owner's Contributions, Shareholder's Distributions, or Shareholder's Contributions for the previous year?
➡️ Profit and Loss Report
Go up to “Reports”
“Company & Financial”
“Profit and Loss Standard”
➡️Profit & Loss
Income – Expenses = Profit
➡️ Balance Sheet Report
Go up to “Reports”
“Company & Financial”
“Balance Sheet Standard”
Net Income will be moved to Retained Earnings (First day of Next Year)
Go up to “Company”
“Make General Journal Entries…”
Assigning numbers to Journal Entries pop up screen
Click “OK”
“Date” (First day of next year)
“Account” under Owner’s Equity
Credit “Amount”
“Memo”
➡️ 2nd Line
“Account” Retained Earnings
Debit “amount”
“Memo”
Click “Save & Close”
➡️ Note:
Owner’s Draw – Credit
Owner’s Contribution – Debit
Retained Earnings should match/total both Debit & Credit side
Tip: If you are behind on your closing entries you can go back and adjust one year at a time.
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I’d love to hear if this inspired an “aha moment” and if you are ready to close your Equity accounts.
Timestamps:
0:00 - Intro
0:31 - how retained earnings work (Profit and Loss)
1:11 - Retained earnings in Balance Sheet
3:25 - Close into Retained Earnings (Journal Entry)
6:50 - Checking Balance Sheet (Retained Earnings)
7:02 - Checking Chart of Accounts (Retained Earnings)
7:23 - Candus Kampfer Final Thoughts
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