# Why does a sales transaction affect the Retained Earnings account?

**URL:** <https://forum.manager.io/t/why-does-a-sales-transaction-affect-the-retained-earnings-account/64696>\
**Category:** Uncategorized\
**Created:** [August 19, 2025, 9:19am UTC](https://forum.manager.io/t/why-does-a-sales-transaction-affect-the-retained-earnings-account/64696 "2025-08-19T09:19:55Z")\
**Posts on this page:** 4\
**Page:** 1

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**Author:** ![flokatikrypton](https://avatars.discourse-cdn.com/v4/letter/f/90ced4/32.png) [@flokatikrypton](https://forum.manager.io/u/flokatikrypton)\
**Post date:** [August 19, 2025, 9:19am UTC](https://forum.manager.io/t/why-does-a-sales-transaction-affect-the-retained-earnings-account/64696/1 "2025-08-19T09:19:55Z")

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From my (limited) understanding of Accounting, this is what I think should happen when a sale is made:

1. Debit the **Cash account** by the selling price

2. Credit the **Income account** by selling price

3. Debit the **Expense account** by the buying price

4. Credit the **Inventory account** by the buying price

But when I record a transaction in [Manager.io](http://Manager.io), on top of the above steps, it also credits the **Retained Earnings** by `(selling price - buying price)`. Is this how it is supposed to work? If yes, where is the debit side of the extra transaction?

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**Author:** ![Joe91](https://sea1.discourse-cdn.com/flex019/user_avatar/forum.manager.io/joe91/32/35781_2.png) [@Joe91](https://forum.manager.io/u/Joe91)\
**Post date:** [August 19, 2025, 10:07am UTC](https://forum.manager.io/t/why-does-a-sales-transaction-affect-the-retained-earnings-account/64696/2 "2025-08-19T10:07:51Z")

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The debit and credit entries you list do not match up - you need the credit to the Retained Earnings to match them up

try this [www.accountingcoach.com](http://www.accountingcoach.com)

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**Author:** ![Muhamad\_Almahdy](https://sea1.discourse-cdn.com/flex019/user_avatar/forum.manager.io/muhamad_almahdy/32/45341_2.png) [@Muhamad\_Almahdy](https://forum.manager.io/u/Muhamad_Almahdy)\
**Post date:** [August 19, 2025, 12:53pm UTC](https://forum.manager.io/t/why-does-a-sales-transaction-affect-the-retained-earnings-account/64696/5 "2025-08-19T12:53:41Z")

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Retained earning record gross profit after sales

When you create sales invoice journal entry is:

Debit: Accounts receivable or cash

Debit: Cost of goods sold

Credit: Sales

Credit: Inventory on hand

Gross profit is The difference between sales and cost of goods sold is posted to Retained earnings

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**Author:** ![system](https://sea1.discourse-cdn.com/flex019/user_avatar/forum.manager.io/system/32/2313_2.png) [@system](https://forum.manager.io/u/system)\
**Post date:** [August 19, 2026, 12:54pm UTC](https://forum.manager.io/t/why-does-a-sales-transaction-affect-the-retained-earnings-account/64696/6 "2026-08-19T12:54:35Z")

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