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Question

Why doesn't the Retained Earnings balance in the GL Summary (Trial Balance) Report match my Balance Sheet?

Solution

Trial Balance

The Retained Earnings balance in the GL Summary (Trial Balance Report) reflects only entries actually made to the Retained Earnings Account. Typically, entries to Retained Earnings are systematically posted when the year is closed. Upon closing a fiscal year, the system will generate a closing General Ledger entry that posts the net income for the year to the retained earnings account. These entries can be viewed in the GL Details report if you select document type "FY - General Ledger Closing" as in the screenshot below.


Balance Sheet

The Retained Earnings balance on the Balance Sheet reflects all prior year Net Income or Loss, whether those prior fiscal years have been closed or not. Once the prior fiscal years are closed, the Retained Earnings balance in the GL Summary Report will be updated to reflect the posting of the prior year's net income/loss.


Example

The following is an example Equity section on the Balance Sheet, as an illustration of this concept:

Notice the Retained Earnings Balance of $1.7M and the Current Year Income balance (which ties to the Income Statement) of $1.1M.

These values are for fiscal year 2015, which has not yet been closed.



Now, notice the Balance Sheet values for 2016. The Retained Earnings balance is $2.8M (the sum of the $1.7 and $1.1 above).

Even though the Balance Sheet rolls Retained Earnings automatically, the Trial Balance report will only reflect the increase to Retained Earnings when the fiscal year 2015 is closed. 



Additional Information

KC - General Ledger Fiscal Period Close


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