Determination of Annual Net Income and Retained Earnings 

Use

You do not have to make any manual postings since the system automatically calculates the following two financial statement items:

●      The profit (or loss) for the year

●      The profit (or loss) carried forward (retained earnings)

Features

The system determines both values as follows:

The profit (or loss) for the year

The profit (or loss) for the year is calculated by the report that creates the balance sheet and P&L statement. You do not have to make the traditional postings of debiting profit account and crediting the equity account (or crediting the loss account and debiting the equity account). The balance of the accounts assigned to the items Assets and Liabilities gives us the profit (or loss) for the year. Accounts displayed under the items Not Assigned and Fin. Statement Notes do not flow into the annual net profit/net loss for the year or into the P&L statement result. All other accounts are interpreted as P&L accounts. The system also determines the profit and displays it in the appropriate line of the profit and loss statement and equals the profit shown in the balance sheet if all relevant accounts are assigned. You do not have to close out the profit and loss statement accounts using a profit account.

The profit (or loss) carried forward (retained earnings)

The profit (or loss) carried forward from previous years is taken from the retained earnings account (see the diagram above), provided you have assigned the account to this item in the financial statement version. The balance from the profit and loss statement accounts is carried forward to this account by the balance carry forward program. No document is created. The retained earnings account is debited in the new year if the company uses the retained earnings.

You can use more than one retained earnings account. For more information on the retained earnings account, see the SAP Library under Accounting → Financial Accounting → General Ledger Accounting or General Ledger Accounting (New) → G/L Account Master Data → Special Features of Profit and Loss Accounts and Using Several Retained Earnings Accounts: Example.