Understanding retained earnings calculations
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Understanding retained earnings calculations
To give you a better idea of the overall value of your business, we’ve made a new addition to the Balance Sheet in the form of the Retained Earnings section of the report.
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Sorry but I do not see Retained Earnings on my balance Sheet???
Hi @Yan . If you do not yet see the Total Retained Earnings header in your Balance Sheet report, this is probably because you are still on our old accounting software. We're currently working on getting all of our users over to the new software, at which point you will have access to this feature.
I have had Wave since 2012. My net income has been
2012 -12767
2013 -18720
2014 -16293
2015 -6705
2016 3646
2017 8217
2018 -4020
On my 2018 Balance Sheet, the prior year profit is -42,622, which is right. It is 2012 to 2017. Then I lost -4020 in 2018. The retained earnings shows -3127, shouldn't it show -46642? That is the losses from the start of the business. And no dividends paid out. And if yes, how do I adjust it?
Hi @PlanAssist! I could definitely speak to how retain earnings work on a general basis for you, however in terms of the details to your specific business, it may be slightly difficult from the information that you have provided (given that this is a public forum).
Retained earnings are typically the net income that is left over for the business at the end of the year. From my understanding, the retained earnings remain in the same amount until the end of the year when the current and previous years retained earnings (or losses) are then totalled for get you the most updated version of your retained earnings.
I totally acknowledge the fact that this is a broad answer, so feel free to send me a DM here and I can work with you to further investigate the issue in greater detail.
Disappointed. Your article almost goes out of the way to confuse people. Why would you release this article, when the feature is not available for everyone yet? Why not say that expressly in the article, and then once the feature is fully rolled out, you can then revise the article? What about people on the "old version" of the system, how does "retained earnings" work for them? It is an entry in the chart of accounts, but it does not appear on the balance sheet. Why not take the opportunity to explain how it works for them currently, and how the transition will be managed?
Hi @AndrewR , apologies for the lack of clarity as to how the contents of this article relate to the previous version of Wave. For a little context into why this article is visible even to those on the previous system, this article and a handful of others were put together as "change management" content to prepare business owners for what to expect leading up to and beyond the transition.
I'm still on the previous version as well, and I have access to an account with the newer version, so I can show you how retained earnings functions in both. To start with, here's the bottom line of the balance sheet that you'll be familiar with. It's a screenshot from my test account:
Here's a screenshot from the new version. Please disregard the account names, I've been doing quite a bit of testing in this business:
Retained Earnings in the new version of Wave serves more as a contextual piece than a concrete change to how accounting is performed between the two versions. It separates out Owner Investment/Drawings, and totals up current and previous years' profits to provide additional insight into the equity section of the report.
I hope this helps clarify things, and I'm happy to answer any additional questions!
Hi @James_Hudson , just wondering how to deal with retained earnings when making the switch from QBO to Wave? I followed the instructions of comparing Trial Balance reports, but was unsure whether or not I should create a Retained Earnings account in Wave as it seems as though it is an account that is self-generated based on P&L? I put my Retained Earnings line from my Trial Balance report from QBO in Owner's Equity in Wave, but was hoping you could offer some insight on whether this is correct or not?
Hey @JDHarwoo! Thanks for reaching out! On the Balance Sheet in Wave, the Retained Earnings value is pulled from the Net Profit section of your Profit & Loss Statement. To have your Retained Earnings appear on your balance sheet, we recommend going to your Chart of Accounts > click on the 'Equity' tab > under the 'retained earnings' header, add an account for your QBO retained earnings. All accounts under the 'retained earnings' header will reflect on the Balance sheet.
Thank you @EmmaP !