[Solved] Retained Earnings Journal Entry Example

 Thanks for visiting our blog again. In today's post, we have solved Retained Earnings Journal Entry example and explained how to store Retained Earnings Journal Entry in Tally. So if you guys are also learning tally then This example may help you understand the retained earnings entry.

What is retained earnings?

Before we solve the example let's understand what retained earnings is?

"Retained earnings represent the cumulative profits that the company has kept and reinvested in the business, not distributed as dividends to shareholders. They contribute to the equity and financial strength of the company for future growth and expansion."

Check also:- Debtors and Creditors In Balance Sheet

Now let's move to the journal entry example:

Retained Earnings Journal Entry Example

retained earnings journal entry example

Let's say a company generates a net income of 10,000 for the year, and it decides to retain 5,000 of that income in the business rather than distributing it to shareholders as dividends.

Account	Debit ($)	Credit ($)
Retained Earnings	5,000
Income Summary		5,000

How to Record Retained Earnings in Tally

Now let's take a look at how you can store retained earnings in tally ERP 9

Step 1:- Create a Journal Entry:

• Go to the Gateway of Tally > Accounting Vouchers > F7: Journal.

Step 2:- Enter the Details:

• Debit Retained Earnings Account: Enter the retained earnings amount under the debit column. For example:

• Account: Retained Earnings
• Debit: 5,000

Step 3:-  Credit Income Summary Account: 

Enter the same amount under the credit column to balance the journal entry. For example:

• Account: Income Summary
• Credit: 5,000

Step 4: Save the Entry.

Conclsuion

Here in this post, we solve an example of a retained earnings journal entry so if you are learning tall y or accounting then you should learn this topic and know how you can solve these kinds of problems in tally.