Question

How do you close Retained earnings? Do you do a journal entry?

Answer 1

Retained earning is balance avaialbe in company after making all the expenses. Retained earning is a part of Shareholder's Equity balance. Retained earning is a continius balance account if there is good profit than the credit balance is there in Retained earning and if there is losssess accumulated than there is debit balance.

Retained earning can be closed as below,

Opening Retained earning = XXX

Add: Profit/(Loss) of the year = XXX

Less: Dividend Paid (If any) = XXX

Closing Balance of Retained Eearning.

So it means retained earning can be closed by addiing balance of revenue account and reduce with payments of dividend,

Yes, There is journal entry is required for this , For transfer of revenue retained earning will be credited and revenue account will debited. and same for every payment from retained earning will be debited till the balance is available.