Retained Earnings
Retained earnings is the cumulative all-time net income of a book — every dollar earned minus every dollar spent since it began — recalculated fresh every time a balance sheet runs.
In short
The equity line that captures your whole financial history, not just this period. BalanceMCP computes it live, as all-time income minus all-time expenses as of the report's date, so there's no once-a-year closing entry required for it to be accurate.
Also called: accumulated earnings, retained profit
Retained earnings is the equity line where a profit and loss statement's whole history lands on the balance sheet. It represents everything earned and kept, cumulatively, since the very beginning of the book — not just the current period's net income.
BalanceMCP calculates it fresh, on the fly, every single time a balance sheet runs, as all-time income minus all-time expenses up through the date being asked about. There's no once-a-year "closing entry" that zeroes out income and expense accounts and rolls the result forward into a permanent balance — the report just computes the cumulative total directly, every time, which is a deliberate design choice rather than a shortcut.
That means locking a period and computing retained earnings are unrelated mechanisms that happen to both live in the neighborhood of "end of period." Locking a month through lock_period doesn't touch retained earnings at all — it only prevents new postings into that date range. Retained earnings would be exactly as accurate even if nothing were ever locked.
This differs from how some other accounting systems handle the same idea — many perform actual ceremonial closing entries at year-end that zero out every income and expense account. BalanceMCP doesn't, and it isn't a missing feature: computing the figure live avoids the entire category of bugs where a forgotten or malformed closing entry leaves the number wrong.
What people get wrong
- Expecting to post directly to a Retained Earnings account — it's calculated, not a target for manual entries.
- Assuming you need to "close the year" for the figure to be accurate — it's computed live from all-time activity every time the report runs.
- Confusing retained earnings (all-time, cumulative) with net income (a single period's total) — retained earnings absorbs every period's net income, forever.
Common questions
- Why does my balance sheet show a Retained Earnings figure I never posted to?
- It's calculated automatically as cumulative all-time income minus all-time expenses, computed fresh every time the report runs — not a real account you post entries to.
- Do I need to close the year for this number to be right?
- No — it's computed live from all-time activity regardless of whether anything has ever been locked. Locking a period is a separate mechanism that only affects what can be posted, not this calculation.
Machine-readable: /api/knowledge/concept:retained-earnings