How to debit retained earnings directly

cdavenport22

I can't seem to debit retained earnings directly. I want to account for profit distributions to partners. I can record this as an owner's draw, but then I get a permanent line on the balance sheet showing all the money that has been distributed doing back forever. Is there a way to debit retained earnings directly? Thanks!

Erik

Hi @cdavenport22 this currently cannot be done in Wave. Just so that I have a talking point when I bring this up to the team, is there a particular reason you don't want that permanent line on the balance sheet showing what you have distributed?

cdavenport22

Thanks for the response. Total lifetime distributions is just not a useful line item and does not tell me anything about the current state of the company's finances. I was able to solve this issue by making a journal entry transferring all income and expenses to a "retained earnings" account. Then I debited that account for the distributions.

KelseyRodricks

Thanks for your response @cdavenport22. Knowing about our users' workarounds really helps us improve the user experience.

steve3140

I have exactly the same issue as the original poster. I'm using Wave to process transactions for a Trust and I need to "clear" Retained Earnings at the end of each financial year ... because with this Trust, there are no Retained Earnings from year to year ... all profits are always paid out in full each year.

So when you "created an account" called Retained Earnings and then did your Journal entry, what kind of account did you create? I assume it is an Equity account, so did you just call it "Retained Earnings (cleared)" or something like that? (edit: I've just tried that and it seems okay as a workaround)

For WAVE to consider: this is a feature that is available in QuickBooks and other mainstream packages. Clearing out Retained Earnings is a normal accounting function for Trusts.

Mikeg

Instead of creating accounts, if you have a distribution account (equity account) for each beneficiary, then cumulative distributions will offset retained earnings in the equity section and net to zero. Meaning distributions are shown as a debit while retained earnings is a credit.

pamb

I don't see a retained earnings account in my wave program. i need to use this to distribute money to partnership members accounts. if I create a new account Retained Earnings, does it fall under Equity. It will be a debit account , right.?

Mikeg

@pamb,
The reason you probably do not have a retained earnings account in the equity section is because retained earnings is a corporation account. You probably have owners equity (sole prop and partnerships). See my comment above using distribution accounts for each partner.

pamb

I do have investor/drawings account for each partner and I post their drawings to that but how do I post the amount allotted to each( not equal) and where does it come from? If I had retained earnings I could post it from there.

Mikeg

@pamb,
When you net the draw (equity account) and owners equity (equity account) you should net to partners capital on the tax return or financials. As far as I know Wave cannot split the profit to separate equity accounts. It just uses one. I do bookkeeping and taxes for several multi-member partnerships and s-corps and haven't had a problem. Even in audited financial statements, partners capital is presented as one number. The statement of equity breaks out each partner, but that is a self created schedule used in financial statements.