Retained earnings when the books have no year-end close
Why a client's Achekam balance sheet shows profit on its own line instead of in retained earnings, and how the firm handles it for the annual statements.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
A director opens the balance sheet in her company's Achekam books and rings the firm. "Why is there a separate line for profit? Last year's accountant showed it all in retained earnings." She is right that it looks different, and the firm needs a clear answer, both for her and for its own staff preparing the annual statements from those books.
The short answer is that Achekam's books do not yet post a year-end closing entry. This article explains what that means, how to handle the profit line when preparing statements, and how to protect the year once it is finished.
What a year-end close normally does
In most accounting systems, the end of the financial year triggers a closing entry. The balances on every income and expense account are transferred to retained earnings, the income statement accounts start the new year at nil, and retained earnings on the balance sheet now include the year just ended.
The closing entry changes nothing about the company's position. Total equity is the same before and after it. What it changes is where the result sits: in the income statement accounts, or in retained earnings.
Why profit sits on its own line in the client's books
Achekam has no year-end closing entry. Profit is not closed to retained earnings, and the balance sheet shows it as its own line within equity. This is a current limitation of the books, not a setting the firm has missed.
For the client's day-to-day use, the effect is mostly cosmetic: equity in total is right, and the separate line shows the result. For the firm preparing annual statements, it means retained earnings in the ledger have not moved for the year's result, and the income and expense accounts have not been reset. Before relying on the profit line, reconcile it: confirm which part of it is the result for the year being reported, and whether anything in it belongs to an earlier period that a close would already have moved into retained earnings.
The trial balance gives you the tools. In Achekam it shows each account for all time, for a period or at a date, and says whether debits equal credits. Taking income and expense accounts for the financial year, and balance sheet accounts at the year-end date, separates this year's result from everything that came before.
Mapping it correctly for the statements
The annual statements must present equity properly: retained earnings at the start of the year, the profit or loss for the year, dividends and other movements, and retained earnings at the end. IAS 1 sets the presentation requirements for full IFRS reporters, and IFRS for SMEs has equivalent requirements for smaller entities. The IFRS Foundation's summary of IAS 1 Presentation of Financial Statements covers its overall requirements for the presentation, structure and minimum content of financial statements, and notes that IFRS 18 replaces it for periods beginning on or after 1 January 2027.
When the firm opens the trial balance under Financial Intake to map it, Achekam suggests where each line belongs, using the file's own mapping column, earlier mappings, AI or keyword rules, and no suggestion becomes an approved mapping until a person approves it. That approval step is where this issue is handled. The person mapping must make sure that:
- this year's income and expense accounts map to the income statement;
- retained earnings carry the balance brought forward from last year's issued statements;
- nothing from earlier years lands in this year's income statement;
- the statement of changes in equity reconciles opening to closing retained earnings.
From a mapped trial balance, the Studio builds a draft set of statements with every figure calculated in code, including the directors' report, the four primary statements, policies, notes and a detailed income statement. Because the figures come from the mapping, a mapping error shows up in equity, so read the statement of changes in equity first. That statement is covered in the statement of changes in equity.
Locking the year so nothing posts behind you
Once the statements are prepared from the client's books, the year must not move. Months in Achekam can be soft-closed, hard-closed and locked; a closed month refuses postings from every source, and reopening a hard close needs a second approver.
Close every month of the financial year before the statements are finalised, and lock them once the statements are issued. That stops a late invoice, a bank match or a well-meaning journal from changing a year whose figures are already in signed statements. If the client's auditor later requires an adjustment, it then has to go through the reopen approval, which is the right amount of friction.
If the firm posts its year-end adjusting entries in the client's books, post them before the months are closed. If it records them only in the statements, tell the client which entries to post in the new year so the books and the issued statements agree on opening balances. How a firm works in the client's own ledger at year end is covered in statements when the client keeps books on Achekam.
Explaining it to the client
Give the client a short, consistent explanation:
- The books show the year's profit on a separate line because Achekam does not post a year-end closing entry.
- Total equity is the same either way.
- The annual statements show the profit within retained earnings, as the accounting framework requires.
- The firm reconciles the two every year, and the opening balances for the new year match last year's issued statements.
A worked example in words: a services company's books show retained earnings brought in at the start of its first year on Achekam, plus a profit line. At year end, the manager takes the income statement accounts for the year and the balance sheet at the year end, maps them, and agrees opening retained earnings to the prior-year statements. The statement of changes in equity reconciles. The months are closed, the statements issued, the year locked, and the director gets a one-paragraph explanation with her copy.
For the firm's checklist
Add one line to every year-end file for clients whose books are on Achekam: "Profit line in the client's books reconciled to the result for the year; opening retained earnings agreed to the prior year's issued statements." It is a small step that answers the question before the client asks it.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
