QuickBooks deals with Retained Earnings in a very unique way. In QuickBooks, Retained Earnings is calculated on prior year profit and loss transactions. It is recalculated any time you run financial statements. If you look at the Chart of Accounts, you will not see a balance in Retained Earnings. If you double click on Retained Earnings in the Chart of Accounts, you get an Account Quick Report, not an Account Register as you do on any other account. The only transactions displayed in the Quick Report will be the end of year closing entries.
If your client makes an entry in a prior period, it will change the balance in Retained Earnings. Since Retained Earnings does not produce an Account Register, you are not able to see what changed the balance.
There is a way to take care of this problem. The first step is to change the name of the Retained Earnings Account to “Prior Period Adjustments”. You might also want to change the description of the account to “QuickBooks Default Retained Earnings Account.”
Next, create a new Retained Earnings Account. For the description type “User Created Retained Earnings Account.”
When calculating Retained Earnings, QuickBooks will now post the amount to the Prior Period Adjustments account. Make a General Journal Entry on the first day of the next fiscal year to manually close out the Prior Period Adjustment balance to the “new” Retained Earnings account. (Ignore the warning about making entries to the Retained Earnings account.) This adjustment will be made every year.
A benefit of this work-around is that you will now be able to see the detailed transactions in the new Retained Earnings account.
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I tried to this but I’m still unable to view the data (in ledger fromat) from the previous years. Will this method just be beneficial for future transactions? It would solve so many issues if I could evaluate past numbers.