Retained Earnings

Retained Earnings is the profit the company has kept since it started, after dividends and transfers to reserves. During the year nobody posts here; income and expense ledgers collect the year's results. At Ashadh end the Period Closing Voucher moves the net of every income and expense account into this ledger in one submission, so the new year starts with clean Profit and Loss ledgers and the Balance Sheet carries the cumulative profit. A loss closes as a debit and reduces the balance. Dividends declared at the AGM are debited here, with 5 percent TDS withheld. If the voucher is skipped, the old year's ledgers stay open and the new year's Trial Balance starts dirty.

Closing Retained Earnings = Opening + Net profit for the year (or - Net loss) - Dividends - Transfers to reserves

1. 01Post every income and expense for the year and finish the bank reconciliation.
2. 02Go to Invoicing > Period Closing Voucher > New; pick the fiscal year and Retained Earnings as the closing account.
3. 03Submit. The entry below posts: income ledgers are debited, expense ledgers credited, and the net profit lands here.
4. 04Open Financial Reports > Balance Sheet for the new year; the profit now shows inside Equity.
5. 05Record dividends by Journal Entry: Dr Retained Earnings, Cr TDS Payable 5 percent, Cr Bank.
6. 06Read the cumulative balance on Financial Reports > General Ledger at any time.

Posted automatically by Period Closing Voucher at Ashadh end. Post dividends by Journal Entry; never post day-to-day income here.

Period Closing Voucher at Ashadh end 2084 closes every income and expense account and credits the Rs 3,20,000 net profit to Retained Earnings.