How to Define Retained Earnings Account in SAP
Mason Garcia
⚡ Smart Summary
Retained earnings accounts in SAP carry forward the net profit or loss from the profit and loss statement into the new fiscal year, defined with transaction code OB53 and linked to each P&L statement account type.
What is a Retained Earnings Account in SAP?
A retained earnings account is a special general ledger account that carries the net profit or loss forward into the next fiscal year. At year-end, SAP transfers the balance of every profit and loss (P&L) account to the retained earnings account during the balance carryforward.
The account is defined with transaction code OB53 and linked to a P&L statement account type, so every P&L account knows where its closing balance should be carried.
Why Define a Retained Earnings Account?
Without a retained earnings account, SAP cannot close the P&L accounts at year-end or start the new year with zero balances. Defining it is a mandatory preparation step before P&L accounts can be created and before the first year-end close.
Steps to Define a Retained Earnings Account in SAP
The following steps define a retained earnings account using the SPRO customizing path (transaction OB53).
Step 1) Enter Transaction code SPRO in the command field.
Step 2) In the next screen, select SAP Reference IMG.
Step 3) In the next screen, “Display IMG”, navigate the following menu path: SAP Customizing Implementation Guide -> Financial Accounting -> General Ledger Accounting -> G/L Accounts -> Master Data -> Preparations -> Define Retained Earnings Account.
Step 4) In the next screen, enter the Chart of Accounts to maintain the retained earnings account.
Step 5) In the next screen, select New Entries from the Application Menu.
Step 6) In the next screen, enter the following information:
- Enter the P&L statement account type to determine the retained earnings account for each P&L account. If you are creating a P&L account, you must make an entry here.
- Enter the G/L account that will be considered as the retained earnings account.
Step 7) You can maintain the posting key for this account by selecting Posting Key in the Application Menu.
Step 8) After this, you can assign the posting key for Debit and Credit.
Step 9) After maintaining all required information, press save 
and enter your change request number.
You have successfully created a Retained Earnings Account.
