S-Corp loss carry forward of $5000 from 2018 to 2019 does not reduce Retained Earnings in Schedule L 1120S

In most instances, the balance sheet in TurboTax Business needs to be manually adjusted.

However, it is not clear as to why there is a carryforward rather than the typical scenario where net losses (or net profits) are passed through to the shareholders on their K-1s.

there is no such thing as an S-corp loss carryforward at least for  Federal S-Corp purposes. There maybe such for states that tax s-corp income.  any loss reduces retained earnings and retained earnings can go negative.  any loss limitations are at the personal level.    based on the lower of basis or at risk amounts.