370 Retained Earnings

Owner’s Equity

Net Worth

Synopsis

Account 370, Retained Earnings is established to record the accumulated profit (or loss) of the dealership. This account is for use by corporations only.

Debits

Credits

Amounts paid in excess of par or assigned value of capital stock retired
Balance in the dividends account at the end of the accounting year
Net loss at the end of the accounting year

Net profit at the end of the accounting year

Example 1

Record the transfer of the net profit of $1,687,894 at the end of the accounting year.

Journal: General Journal

Entry:		Debit	Credit
Account 399	Profit and Loss	$1,687,894
Account 370	Retained Earnings		$1,687,894

Example 2

Record the reclassification of dividends totaling $500,000 to retained earnings at the end of the year.

Journal: General Journal

Entry:		Debit	Credit
Account 370	Retained Earnings	$500,000
Account 375	Dividends		$500,000

Example 3

Record the year-end audit adjustment of $5,500 for the deferred taxes due to difference in book and tax depreciation methods. (Note – the books had already been closed for the year)

Journal: General Journal

Entry:		Debit	Credit
Account 370	Retained Earnings	$5,500
Account 333	Deferred Taxes		$5,500

Comments

A credit balance represents retained profits accumulated in prior years in an incorporated business.