The Retained Earnings category
Retained Earnings is an expense category that we use with settlement entries in ProfitGauges. The reason we use this category is to get the settlement to balance without making the reports incorrect.
There are generally two main reasons to use the Retained Earnings category.
- There is a deduction on your settlement, that has already been accounted for, such as fuel costs that you have already entered into FuelGauges, and there is also a deduction for fuel on your settlements. In this case, we need to make an entry on the settlement for the fuel deduction, so that the settlement will balance, but we don't want to deduct the fuel cost twice. So by using the Retained Earnings category, your settlement will balance, but the Retained Earnings category does not show up on any reports so the cost will not be doubled.
- The entry in your settlement is not tax deductible. For example, many people have money taken out of their settlement and moved into a Maintenance Account or Maintenance Reserve. This is not a tax deductible expense because the money is still yours. It has not been spent, it has only been moved to another account, but it reduces the net settlement so we need to make an entry for it so that the settlement balances. Again, the Retained Earnings category is the way that you do that.
Some common uses for retained earnings on the settlement include:
- Fuel costs when syncing with FuelGauges
- Cash Advances
- Maintenance Accounts
- Settlement Garnishments (child support, IRS liens, etc.)
If you can answer no to either one of these two questions, then you should be using Retained Earnings.
- Is this tax deductible?
- Did I actually spend the money? (or did it just get moved to another place)
Creating the Retained Earnings Category:
- On the Settlement Entry screen, click on 'Select' under the Expense section.
- Choose 'Add New' from the drop-down menu.
- Now you'll see a new select menu appear.
- Choose 'Select' again.
- Choose 'Retained Earnings' from the drop-down list.
- Type in a name for the subcategory.
- It is recommended to title it exactly as it appears on your settlement, this will remind you in the future how to handle this entry and avoid confusion.
- Now you can enter in the amount of the deduction, and ProfitGauges will do the rest. You'll be able to balance to the net settlement amount, and your reports will be correct.
- You only need to follow the preceding steps one time for each 'Retained Earnings' subcategory. From now on when you enter a settlement you will see your new expense category in the drop-down list.