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Retained earnings

In one sentenceThe total profits the business has made since incorporation and kept inside it, not distributed to the owners and not transferred to reserves.

Simply put

Each year net profit is added to this account, and what is distributed to the owners and transferred to reserves is deducted from it. If the business makes a loss the balance falls, and it may turn negative, in which case it is called accumulated losses.

You find it in the statement of financial position within equity, and it answers the question: how much of its profits has the business reinvested in itself?

Worked example

A pharmacy started the year with retained earnings of 250,000 SAR, made a net profit of 180,000 SAR, and distributed 100,000 SAR to the partners.

Balance at the start of the year250,000
+ Net profit for the year180,000
− Distributions to partners(100,000)
Balance at year end = 250,000 + 180,000 − 100,000330,000 SAR

Formula: Opening balance + net profit − distributions − transfers to reserves

Don't confuse it with

CashRetained earnings are an accounting figure in equity, and they may be invested in inventory or assets rather than sitting in the cash box.

in FullScreen ERP

The system supports unlimited fiscal years, so you compare performance between years from one place. General accounts