What is Retained Earnings? (Explained like you’re 10)
Imagine you have a lemonade stand.
Every day you sell cups of lemonade and get money from your customers.
At the end of the day, you count your money.
You pay for your lemons, sugar, and cups (those are your expenses).
What’s left over after paying your expenses is your profit.
Now you have a choice:
Spend it — buy yourself candy, a new toy, or maybe a fancy hat.
Save it — keep the money in your lemonade stand “piggy bank” so you can buy a bigger table next summer, or open another stand.
The money you save in your business instead of spending it all is called Retained Earnings.
In grown-up business words:
Retained Earnings = the profits a business has made over time, minus any money that’s been paid out to the owners (or shareholders).
Think of it like your business’s “savings account” inside your books.
It’s not always cash sitting in the bank—it’s the total amount your business has chosen to keep and reinvest instead of giving away.
Why it matters
Shows how much your business has kept over time — a big number means you’ve been able to save and grow.
Helps with big purchases — like upgrading equipment or funding new projects.
Signals health to lenders — banks like seeing strong retained earnings because it means you’re profitable and responsible.
Where to find it in QuickBooks Online
In QBO, Retained Earnings lives on your Balance Sheet in the “Equity” section.
Each new year, QuickBooks automatically moves last year’s net income into the Retained Earnings account so your books stay tidy.
Bottom line:
Retained Earnings is your business’s way of saying,
"I worked hard, made money, and I’m keeping some of it to get even better next time."