Accumulated Deficit
Definition: Negative retained earnings
Scope:ModerateDifficulty:Easy
Part of: Retained Earnings
Negative retained earnings
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Close net loss | ||
| Year-end: net loss of $15,000. | ||
| Retained EarningsEquity− | $15,000 | |
| Income Summary | $15,000 | |
| Loss reduces retained earnings. Negative balance = accumulated deficit. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Retained EarningsRetained EarningsEquityThe owner’s residual interest in the business. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$15,000.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
Normal bal. ▶
$15,000.00
Income SummaryIncome SummaryAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$15,000.00
$15,000.00
DurationLong-Term
Related Subjects
See Also
- Retained EarningsPart of Retained Earnings
External Links
- Retained earnings#Accumulated deficit — Wikipedia