EOY Entries—Current Earnings plus Distributions to Retained Earnings
Re-classing, or moving, your Current Earnings plus any Distributions to Retained Earnings should be done AFTER the current year is closed. The net income on the P&L or Income Statement needs to tie to the Current Earnings on the Balance Sheet, so if you make that entry prior to the year being closed, it will be incorrect, and it will take additional journal entries to correct.
Here are the steps to follows:
1. Close Period 12
2. Close Period 13
3. Pull Balance Sheet for Period 13
4. Post entry to Period 1--the specific day of the month doesn't matter, it just needs to be done in Period 1. Make a Debit to Current Earnings and a Credit to Retained Earnings/Prior Year. Any Distributions should reduces Retained Earnings.
**REMEMBER: CLOSING A PERIOD AND/OR A YEAR IS NOT REVERSIBLE.
Here are the steps to follows:
1. Close Period 12
2. Close Period 13
3. Pull Balance Sheet for Period 13
4. Post entry to Period 1--the specific day of the month doesn't matter, it just needs to be done in Period 1. Make a Debit to Current Earnings and a Credit to Retained Earnings/Prior Year. Any Distributions should reduces Retained Earnings.
**REMEMBER: CLOSING A PERIOD AND/OR A YEAR IS NOT REVERSIBLE.