Recording S Corp Shareholder Distributions

[Taxman]

If a shareholder takes a cash distribution from an S-Corp that has net income, would the following entry be ok, or is there another heading of an equity account that should be used? Just like to find out how some of you record shareholder distributions. Thanks



Dr. Equity - Shareholder Distributions XXX

Cr. Cash XXX

[OldJack]

Yes, that would be an appropriate account and entry. Remember, the shareholder distributions account is a normal credit account like all equity accounts (shown as positive amounts on the financial report ) but it will normally show a negative amount (on the report) because you are debiting the account. This is correct as it shows on the balance sheet as a reduction of equity. The distributions account can be left with a running balance forever or it can be closed to zero each year by clearing the account to the retained earnings account and only showing current year distributions.

[Taxman]

Thanks

Thanks OldJack for the reply. I figured the entry was correct, but it's always nice to run it by someone else. Thanks again.

[dsi]

As OldJack pointed out, the "distributions" account can be accumulated forever or closed out each year. I find it easier to close it out each year. It allows me to complete the BS on the 1120S with ease.