Retained earnings

Retained earnings show how much profit your business has kept over time instead of paying it out to owners or shareholders. It’s one of those accounting things that sounds more complicated than it is, but don’t worry, stub handles it automatically for you.

What are retained earnings?

When your business makes a profit, that money can either be:

• paid out to you or other owners as drawings or dividends, or
• kept in the business to help fund future expenses or growth.

The portion you keep becomes your retained earnings. It’s the running total of all profits that have stayed in the business since you started.

In simple terms:

Retained earnings = Total profits – Drawings or dividends paid out

Why retained earnings matter

Retained earnings show how much profit your business has built up over time. They’re useful because they:

• Reflect your business’s long-term financial health
• Show how much profit you’ve reinvested back into your business
• Help lenders or investors see how sustainable your growth is

You’ll find retained earnings under the Equity section of your Balance Sheet.

How it works in stub

stub automatically creates and updates your retained earnings account for you. You don’t need to add or edit it.

Here’s what happens:

• At the end of your financial year, stub takes your net profit or loss and adds it to your retained earnings account.
• When your new year begins, stub rolls that balance forward automatically.

You’ll see your retained earnings reflected in your Balance Sheet report and General Ledger under Equity.

For example

Let’s say your business earned R100,000 in profit last year and you withdrew R20,000 for yourself.

stub will automatically calculate your retained earnings as: R100,000 – R20,000 = R80,000

That R80,000 stays in your retained earnings account and carries forward to the new year.

Good to know

• You don’t have to create or manage this account manually.
• If you edit or add past transactions that affect profit, stub updates retained earnings automatically.