500
I have a newbie question about retained earnings accounts in Dynamics GP. Is a new retained earnings account created each year, or does a retained earnings account simply get "zeroed-out" upon closing?
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Thank you K Day. That is precisely what I needed to know.
The retained earnings account is typically the same account every year. It is a Balance Sheet account and is in the Owners equity section of the balance sheet. Closing the year will sum up the balances in all of your Profit and Loss Accounts and create a journal entry to zero out the Profit and Loss accounts and offset that by posting that to the Retained Earnings Account.
So to simplify, lets say I have 2 P&L Accounts total on my books. Sales and Expenses. Throughout the year I had sales of $1,000 and expenses of $500. I made a profit of $500.00 this year. When I close the books, there will be a credit to Expenses for 500.00 (to zero it out because expenses will have a debit balance), a debit to Sales for 1,000 (to zero it out because Sales is a credit balance) and then a credit to Retained Earnings for 500.00
If this scenario went on exactly the same, after year 3 you would have a credit balance in Retained Earnings of 1,500. Credit Balance for Owners Equity is good (debit balance means you are losing money)
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