Where to Enter Retained Earnings in Lacerte
Beginning retained earnings is entered on the balance sheet screen, screen 29 for an 1120S. The ending figure should be left to compute: Lacerte derives it from beginning equity plus income less distributions. Screen 29 has a Total retained earnings [O] override, and current year additions to other retained earnings are entered on screen 32, Schedule M-2.
- Detail
- Screen 29, Balance Sheet
- Liabilities and Equity
- Total retained earnings [O]
| Trial balance account | Lacerte screen and field | Lands on |
|---|---|---|
| Retained earnings, beginning | Screen 29, Liabilities and Equity | Schedule L line 24, beginning column |
| Retained earnings, ending | Computed. Override is Total retained earnings [O] | Schedule L line 24, ending column |
| Net income | Computed from page 1 and Schedule K | Schedule M-2 |
| Shareholder distributions | Screen 32, Schedule M-2 | Schedule K line 16d |
| Prior period adjustment | Screen 32, additions to other retained earnings | Schedule M-2 |
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| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 42,800.00 | |
| 1200 | Accounts receivable | 68,500.00 | |
| 1300 | Inventory | 55,000.00 | |
| 1500 | Equipment | 145,000.00 | |
| 1510 | Accumulated depreciation | 47,500.00 | |
| 2000 | Accounts payable | 28,400.00 | |
| 2100 | Accrued expenses | 9,200.00 | |
| 2400 | Notes payable | 92,000.00 | |
| 2450 | Due to shareholder | 15,000.00 | |
| 3000 | Common stock | 10,000.00 | |
| 3900 | Retained earnings (the account this page is about) | 86,300.00 | |
| 3950 | Shareholder distributions | 52,000.00 | |
| 4000 | Gross receipts | 612,000.00 | |
| 5000 | Cost of goods sold | 318,000.00 | |
| 6000 | Salaries and wages | 88,000.00 | |
| 6050 | Officer compensation | 72,000.00 | |
| 6300 | Depreciation expense | 21,500.00 | |
| 6900 | Other operating expenses | 37,600.00 | |
| Total | 900,400.00 | 900,400.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Income summary | 74,900.00 | |
| Retained earnings | 74,900.00 |
| Account | Debit | Credit |
|---|---|---|
| Retained earnings | 52,000.00 | |
| Shareholder distributions | 52,000.00 |
Enter the beginning figure, let the ending one compute
Lacerte calculates ending retained earnings as beginning retained earnings plus net income less distributions, with adjustments. That calculation is the point. Typing the ending figure in defeats it and hides whatever disagreement exists between the balance sheet and the return.
The override exists because sometimes you need it: Total retained earnings [O] on screen 29. Treat it as a last resort, after the roll forward has been understood, not as the way the field is normally filled.
When the computed figure looks wrong
Work the roll forward rather than the field. Beginning retained earnings, plus the net income the return computed, less distributions, plus or minus prior period adjustments.
The differences and what they usually mean:
- Difference equals the distributions: they were never entered on screen 32
- Difference equals net income: the income statement side is incomplete, so the computed income is wrong
- Difference equals twice an account balance: a sign is reversed somewhere
- Difference of a dollar or two: rounding, and not worth hunting
Retained earnings is not AAA on an 1120S
Schedule M-2 on an 1120S tracks the accumulated adjustments account, which follows tax rules. Book retained earnings on Schedule L follows the books. They drift apart through nondeductible expenses, different book and tax depreciation, and any history as a C corporation.
So the two figures disagreeing is expected rather than wrong, and forcing the balance sheet to match M-2 is the wrong fix. Enter each on its own terms and let the difference stand.
Prior period adjustments
A correction of a prior year belongs in equity, not in this year's income statement, and it is entered on screen 32 as an addition to or reduction of other retained earnings.
Two things to think about before making the entry. If the prior year return was filed on the old figures, the client needs to know whether an amendment is warranted. And a prior period adjustment that happens to equal the amount by which the balance sheet is out of balance is usually not a prior period adjustment; it is a plug.
Tax return treatment
| Form | Line |
|---|---|
| Form 1120S | Schedule L line 24, with the roll forward on Schedule M-2 from screen 32 |
| Form 1120 | Schedule L line 25, with Schedule M-2 from the balance sheet screens |
Common questions
Where do I enter retained earnings in Lacerte?
Beginning retained earnings goes on the balance sheet screen, screen 29 on an 1120S. The ending figure is computed from beginning equity plus income less distributions. Screen 29 has a Total retained earnings [O] override, and screen 32 handles Schedule M-2 activity.
How does Lacerte calculate ending retained earnings?
Beginning retained earnings plus net income less distributions, adjusted for anything entered on the Schedule M-2 screen. If the result looks wrong, the roll forward tells you which input is missing rather than the balance sheet field.
Why does Schedule L retained earnings not match Schedule M-2?
Because Schedule M-2 on an 1120S tracks the accumulated adjustments account under tax rules while Schedule L carries book retained earnings. Nondeductible expenses, book versus tax depreciation and any prior C corporation history drive them apart, and the difference is expected.
Should I use the retained earnings override?
Only as a last resort. The override hides the disagreement between the balance sheet and the computed roll forward, which is the thing most likely to tell you what is actually wrong. Work the roll forward first.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 17, 2026.