Since the employee retention credit money is not repayable, it would typically be categorized as "Other Income" on your books. When you prepare the S corporation tax return, you would have an adjustment to tax income that would appear on schedule M-1 Reconciliation of income (loss) per Books ... You maintain your accounting income statement separate from the income reported on your 1120-S corporate tax return and then complete schedule M-1 to adjust book income to tax income. You shouldn't need a journal entry to report the receipt of the retention credit money, unless that is how you book receipts.
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