UK Negative retained earnings

[FB555]

Hi All,

Our company has a negative retained earning balance for last year of £(1m) for example and a net income of say £(500k). This would reduce the retained earnings even further to £(1.5m) in this year. However what are the debits and credits for this? Would the retained earning for the start of this year still have a debit balance? If I were to do the following to start the next year:

DR 1.5m P&L
CR 1.5m BS

I would end up with a credit balance which doesnt feel right?

Many thanks

 

[kirby]

Would the retained earning for the start of this year still have a debit balance?

Yes.
And do not post your suggested entry.

 

[FB555]

Thanks Kirby, yes my mistake on the suggested entry!

 

[vedika]

Net income is part of the retained earning and it will be automatically adjust in retained earning when you create the Net income account. In starting business no retained earning should be come only equity will come. which accounting software you are using?