DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Why money spent amount appears on retained earning


#1

I have a problem where my expenses amount appears on retained earning too.

Can you tell me how to make the retained earning disappears as the amount comes from expenses. How i key in the transaction is using ‘Spend Money’ button. I want the amount balanced at 100,000 instead of 105,639.80. Thank you in advance.


#2

You are looking at a Trial Balance report, the only purpose of which is to verify that your double-entry accounting is being done correctly. That is, it verifies that the total of debits matches the total of credits. The trouble with trial balances is that they aren’t very intuitive. They don’t correspond obviously to profit and loss, bank balances, or anything else. In fact, they are somewhat anachronistic, being left over from the days of manual bookkeeping.

Retained earnings is an equity account, so it lives on the right-hand side of the accounting equation and is increased by credits and decreased by debits. According to your Trial Balance, you have no income yet, only expenses. So retained earnings should be getting smaller. And, in fact, you see the total of your expenses equals the amount shown in the debit column for Retained earnings. You might think of this as showing that your earnings are negative. To understand all this better, you might look at http://www.accountingcoach.com/debits-and-credits/explanation.

Elsewhere on the accountingcoach web site, you can learn that retained earnings are the net of profits/losses and dividends or draws since the inception of the business. Exactly how you handle them will depend on your form of organization and preferences of your accountant, possibly also on local laws.

More informative reports would include the Profit and Loss Statement, Balance Sheet, and Cash Summary. In fact, the Summary page combines basic features of the first two and is visible when you open the program.


#3

Is there any way that i can key in the transaction and the amount not appearing on retained earning?


#4

No. Retained earnings is a default account and a very important part of double-entry accounting. If you don’t understand why, I strongly recommend you read up on it at accountingcoach.com or any of the other excellent accounting sites on the web.


#5

I understand. Thank you for your prompt reply :smile:
Cool software you have here. I’ve downloaded lots of accounting software but Manager is so far the best for me…

Keep it up :confetti_ball: :confetti_ball: :confetti_ball:


#6

It’s not my software. I am just a user like you.