Do prior period adjustments clear to retained income
Summary: When the first period in the accounting calendar is opened in the new year (example January 2025), Income & Expense accounts from the prior year (example year 2024) are automatically cleared to Retained Income. If a period in the prior year (example December 2024) is reopened and a journal is created which just touched balance sheet accounts, these account balances are dynamically updated in the January 2025 period.
My question is as follows:
If a period in the prior year (example December 2024) is reopened and a journal is created which just touched income statement accounts, do these balances automatically / dynamically clear to the retained income account in the January 2025 period or do they roll over to the income statement accounts?