Adjusting retained earnings for owner/partner distributions

Retained earnings are profits from previous accounting periods that have not been distributed to the owners. At the end of each fiscal year, QuickBooks computes your profit (or loss) into retained earnings. To distribute profits to the owners, you will need to create a journal entry to an equity account entitled owner's draw or owner distributions, and offset it with retained earnings. We will show you how to create journal entries later on in this chapter.