Retained earnings
In Arabic الأرباح المبقاة
The accumulated profit a business has kept rather than paid out to its owners, carried in equity on the balance sheet from one year to the next.
In plain words
Retained earnings link the income statement to the balance sheet. Each year’s net income adds to them and each dividend reduces them, so the balance tells owners how much past profit is still funding the business.
At year end, a closing journal moves the balance of every revenue and expense account into retained earnings. Those accounts start the new year at zero, and the year’s profit now sits in equity.
The common mistake is posting entries straight to retained earnings to fix an old error. The fix never shows on any income statement, and the reason for the change is lost.
- Opening, 2025-01-01
- SAR 240,000
- Net income for the year
- + SAR 95,000
- Dividends paid
- − SAR 40,000
- Closing, 2025-12-31
- SAR 295,000
In Axon Suite
How Axon Suite handles it
In Axon Suite the year-end close posts one journal in the year’s last period that moves the year’s profit and loss into retained earnings, once every earlier period is closed.
Feature
Close and lock accounting periods
Close a period and nothing posts into it again, whether it comes from sales, purchasing, stock, the till or a rep’s van. Reopen it when you need to, in order, or lock it for good.
Open: Close and lock accounting periods