Closing Equity into Retained Earnings in QuickBooks Online

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?

If you are looking for the Desktop version of click here:    • Closing Equity into Retained Earnings...  



➡️ 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”
Description
Add in 2nd line: Retained Earnings
Add “Debit amount”
Description
**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":    • How to enter Depreciation into QuickB...  

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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
0:28 - How retained earnings work?
0:38 - Retained Earnings Reports
1:52 - View Equity Account
3:33 - Retained Earnings Explained
3:55 - Close Equity into Retained Earnings (Journal Entry)
6:25 - Checking Reports (Retained Earnings)
8:47 - Tips & Tricks/Confidence with QuickBooks


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