Can a business have negative etained earnings but positive earnings/net profit on its balance sheet?
Retained Earnings is a BALANCE SHEET account that shows the company’s earnings or loss since its inception. Earnings / net profit (actually income or loss ) is an INCOME STATEMENT account that reports the income or loss for a period of time, usually for a year. Mathematically: retained earnings beginning of year plus / minus current year income or loss = retained earnings end of year. A company can have a positive income for the year, but a lifetime overall loss, or negative retained earnings, also called a deficit. A company can also have a positive retained earnings but have a current year net loss. “Its making more cash than it’s borrowing!” has nothing to do with this answer. However, confusion on the part of persons unfamiliar with accounting and its terminology is understandable. a company does not “make cash” (unless it is a counterfeiter). the company either generates / makes an income, or has a loss. There is another financial statement called the CASH FLOW STATEMENT or statem
