What is Retained Earnings and Opening Balance Equity?
In our blog series 5 of 5, common Quickbooks terms – What is Retained Earnings and Opening Balance Equity? These are special equity accounts created by QuickBooks and exist on the balance sheet.
- Retained Earnings – This account is used to track all profits for prior years minus any distributions or dividends. This account should be avoided posting any transactions to unless you are making prior year write offs or have received adjusting entries from your CPA. It otherwise gets its data from earnings on the profit and loss report.
- Opening Balance Equity – This account gets posted to when you create a new chart of account for a loan or item that you enter a opening balance for in the set up of the account in QuickBooks. This account should be closed out to retained earnings and not carry a balance.
The above picture is from data in QuickBooks Online. The retained earnings account is for all prior years profit. The net income is for the current year. The opening balance equity should be closed out to retained earnings.
This wraps up our final installment in the blog series: common terms. We enjoyed writing the posts and hope you have learned something. Please contact us or comment if you have any questions.