Retained Earnings

The Retained Earnings account in QuickBooks Online will automatically calculate what the Retained Profit value should be. This will be a cumulative balance of profits from previous financial years.

Let's take an example of a company that has a current financial year ending September 30, 2021. The following screenshot has been extracted from the bottom of the Profit and Loss report:

Figure 11.4 – Extract from the Profit and Loss report

The Profit and Loss report is reporting a final NET INCOME figure of £6,436.59. This is after interest, depreciation, dividends, and tax are calculated.

Tip

It helps to create categories that are not part of day-to-day operations using the Other Expenses account type to ensure that they appear in the lower section of the Profit and Loss report. Bank interest received or government grants should be set up using the Other Income account type to ensure there is no confusion with turnover...