Recording Retained Earnings
in the Journal
Q: How do you record retained earnings in the journal?
A: Earnings means profits and retained earnings is all the net profits one accumulated. Also known as accumulated profit.
Anyway, I think what you are referring to is the transfer of net profit at the end of the year to retained earnings. If so, these are the journal entries...
If you made a profit for the year, the profit and loss account would have a credit balance. So you:
Dr Profit and loss account
Cr Retained earnings
If, however, the business made a loss for the year, the profit and loss account would have a debit balance. So you do the opposite:
Dr Retained earnings
Cr Profit and loss account
Notice how the retained earnings gets the balance on the same side as what was for the profit and loss account? If there was a credit balance in profit and loss (profit), then there ends up being a credit balance in retained earnings.
Hope that makes sense! Good luck!
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