retained earnings vs net income
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I need to make a journal entry to change my net income to match my profit and loss. I have a loss for the last 6 months but have a gain for the past 18 months and my balance sheet shows retained earnings but a loss so my profit and loss shows a gain. how do i make a yr end journal entry to adjsut this?
Answer
Let's say that for all of 2008 you have income of $2,000. For the first six months of 2009 you have a loss of $500. Your 2009 income would be -$500, and your retained earnings for both periods is $1,500 positive.
Retained earnings on the balance sheet is the accumulation of P&L over time, not the annual amount.
Does this help?
Answer
I don't understand your terminology, but from a GAAP standpoint, it's inappropriate, and considered misleading, to have an accounting period of more than a year in length. You can't just arbitrarily "pull" last year's net income forward so that it appears to be positive in the current year.
Inside of a dog, it's too dark to read.
~Groucho Marx
Comment
sffin, for whom do you "need" to show a profit?
Why don't you create a report for all the periods(like mine example was for 2008 and Jan-Jul 2009? Use those dates, Jan 08-Jul 09, but then modify the report so it totals the data into years(other words, Jan-Dec 2008 and Jan-Dec 2009)? The first column will be all of 2008 and the second column will be Jan-Jul 2009. Then 08 will be a profit and 09 will be a loss.
Comment
yes it makes sense but i need to show a profit for the past 18months not a loss, i need the retained earnings to stay as earnings so the lack of income over the past couple months shows a profit not a loss