3999equityNormal balance: Creditbusiness3999 — Retained Earnings
Retained Earnings is where a profit and loss statement's whole history lands on the balance sheet — every dollar earned minus every dollar spent since the book began, not just the current period's result. It is the account that carries your entire financial history forward, cumulatively.
As an equity account, it carries a normal credit balance: profit adds to it, loss reduces it. But it is worth being precise about how that balance gets there, because it is different from what many people expect. BalanceMCP computes it live, fresh, every time a balance sheet runs — all-time income minus all-time expenses through the date being asked about. There is no year-end closing entry that zeroes out income and expense accounts and rolls a result forward into this one; the report simply computes the cumulative total directly, every time.
This account is never something you or your assistant post to directly — it is calculated, not a target for manual entries. Posting to it yourself would double-count activity that the balance sheet is already summing on its own from the 4000, 5000, and 6000 series accounts.
It is also worth being precise about what this account is not: it is not a picture of how much cash the business has right now. A business can be profitable on paper across its history — a healthy Retained Earnings balance — while still being cash-poor today if that profit is tied up in receivables, inventory, or equipment rather than sitting in the bank.
What belongs here
- nothing you post directly — the figure is calculated automatically, not entered
- the cumulative result of every prior period's net income and every prior period's net loss, added together automatically
- the running, all-time equity impact of every 4000, 5000, and 6000 series account since the book began
What does not belong here
- a manual entry crediting or debiting this account directly — it is computed live from the 4000, 5000, and 6000 series accounts, never a target for postings
- a year-end closing entry — this system has none; the balance sheet recalculates the figure fresh every time it runs, from all activity to date
- the current bank balance — this account reflects accumulated profit, not cash on hand, and the two can diverge significantly
Where it shows up
Appears in the equity section of the balance sheet, recalculated fresh every time the report runs — all-time income minus all-time expenses through the as-of date. It updates continuously as new income and expenses post; it does not wait for a year-end close, because there is no closing entry in this system.
Common questions
- Does Retained Earnings tell me how much cash I have?
- No — it reflects accumulated profit over the life of the business, not a current cash balance. A profitable business can still be short on cash if that profit is tied up elsewhere.
- Do I need to close the books for this account to update?
- No. There is no year-end closing entry in this system — the balance sheet computes this figure live, as all-time income minus all-time expenses, every time it runs. Posting a manual entry to this account yourself would double-count activity it is already summing automatically.