QB entries to record S-Corp Dividend Distribution

Discussion in 'Quickbooks' started by MillenniumMan, Apr 14, 2004.

  1. I need help with the step-by-step entries to effect a dividend
    distribution to shareholders of an S-Corp. I have seen something
    about writing checks to shareholders and then doing an end-of-period
    (qtr or yr) journal entry to zero out the retained earnings. I
    understand check writing and journal entries, but I do not understand
    quite how QB generates "retained earnings". Wouldn't writing the
    checks simply reduce the retained earnings?

    Also, I would like to do this distribution without actually writing
    any checks. I want the dividend distributed to the stockholder (only
    1 (me)) and then I want to loan that money back to corporation. This
    dividend is on the profit of the corporation after I have paid myself
    a salary. This dividend is calculated to use up all of the profits
    and should make "retained earnings" for the year be zero.

    As the owner of the Corporation, is this dividend considered an "owner
    draw" instead of a dividend and handled differently?

    Thanks for your help,
    Bill
     
    MillenniumMan, Apr 14, 2004
    #1
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  2. MillenniumMan

    Tee Guest

    "MillenniumMan" <> wrote in message
    news:...
    > I need help with the step-by-step entries to effect a dividend
    > distribution to shareholders of an S-Corp. I have seen something
    > about writing checks to shareholders and then doing an end-of-period
    > (qtr or yr) journal entry to zero out the retained earnings. I
    > understand check writing and journal entries, but I do not understand
    > quite how QB generates "retained earnings". Wouldn't writing the
    > checks simply reduce the retained earnings?
    >
    > Also, I would like to do this distribution without actually writing
    > any checks. I want the dividend distributed to the stockholder (only
    > 1 (me)) and then I want to loan that money back to corporation. This
    > dividend is on the profit of the corporation after I have paid myself
    > a salary. This dividend is calculated to use up all of the profits
    > and should make "retained earnings" for the year be zero.
    >
    > As the owner of the Corporation, is this dividend considered an "owner
    > draw" instead of a dividend and handled differently?
    >
    > Thanks for your help,
    > Bill


    Try posting this to alt.accounting (there's alot of junk posts to weed
    through if you want to read but there are some CPAs there) because the only
    answers you're likely to get here are to ask your accountant.

    --
    Tara
     
    Tee, Apr 14, 2004
    #2
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  3. MillenniumMan

    Karl Irvin Guest

    Make a journal entry

    Debit retained earnings
    Credit stockholder payable.

    "MillenniumMan" <> wrote in message
    news:...
    > I need help with the step-by-step entries to effect a dividend
    > distribution to shareholders of an S-Corp. I have seen something
    > about writing checks to shareholders and then doing an end-of-period
    > (qtr or yr) journal entry to zero out the retained earnings. I
    > understand check writing and journal entries, but I do not understand
    > quite how QB generates "retained earnings". Wouldn't writing the
    > checks simply reduce the retained earnings?
    >
    > Also, I would like to do this distribution without actually writing
    > any checks. I want the dividend distributed to the stockholder (only
    > 1 (me)) and then I want to loan that money back to corporation. This
    > dividend is on the profit of the corporation after I have paid myself
    > a salary. This dividend is calculated to use up all of the profits
    > and should make "retained earnings" for the year be zero.
    >
    > As the owner of the Corporation, is this dividend considered an "owner
    > draw" instead of a dividend and handled differently?
    >
    > Thanks for your help,
    > Bill
     
    Karl Irvin, Apr 14, 2004
    #3
  4. MillenniumMan

    Allan Martin Guest

    "MillenniumMan" <> wrote in message
    news:...
    > I need help with the step-by-step entries to effect a dividend
    > distribution to shareholders of an S-Corp. I have seen something
    > about writing checks to shareholders and then doing an end-of-period
    > (qtr or yr) journal entry to zero out the retained earnings. I
    > understand check writing and journal entries, but I do not understand
    > quite how QB generates "retained earnings". Wouldn't writing the
    > checks simply reduce the retained earnings?
    >
    > Also, I would like to do this distribution without actually writing
    > any checks. I want the dividend distributed to the stockholder (only
    > 1 (me)) and then I want to loan that money back to corporation. This
    > dividend is on the profit of the corporation after I have paid myself
    > a salary. This dividend is calculated to use up all of the profits
    > and should make "retained earnings" for the year be zero.
    >
    > As the owner of the Corporation, is this dividend considered an "owner
    > draw" instead of a dividend and handled differently?
    >
    > Thanks for your help,
    > Bill



    Biill,

    Ask your accountant how do do this and while you are at it ask him/her what
    possible reason you can have for doing this in the first place. I'm a CPA
    with over 30 years of experience and can't think of a single reason you
    would want to do this. I am however eager to learn something new.
     
    Allan Martin, Apr 14, 2004
    #4
  5. MillenniumMan

    Allan Martin Guest

    "Karl Irvin" <> wrote in message
    news:alifc.37549$wP1.141401@attbi_s54...
    > Make a journal entry
    >
    > Debit retained earnings
    > Credit stockholder payable.



    There are those myself included that would argue that a Distributions equity
    account should be set up to keep track of any distributions.

    There are also those that would argue that actual cash should flow back and
    forth to effect this transaction rather than by journal entry.

    There are also those, myself included who question the need for this
    transaction in the first place.




    >
    > "MillenniumMan" <> wrote in message
    > news:...
    > > I need help with the step-by-step entries to effect a dividend
    > > distribution to shareholders of an S-Corp. I have seen something
    > > about writing checks to shareholders and then doing an end-of-period
    > > (qtr or yr) journal entry to zero out the retained earnings. I
    > > understand check writing and journal entries, but I do not understand
    > > quite how QB generates "retained earnings". Wouldn't writing the
    > > checks simply reduce the retained earnings?
    > >
    > > Also, I would like to do this distribution without actually writing
    > > any checks. I want the dividend distributed to the stockholder (only
    > > 1 (me)) and then I want to loan that money back to corporation. This
    > > dividend is on the profit of the corporation after I have paid myself
    > > a salary. This dividend is calculated to use up all of the profits
    > > and should make "retained earnings" for the year be zero.
    > >
    > > As the owner of the Corporation, is this dividend considered an "owner
    > > draw" instead of a dividend and handled differently?
    > >
    > > Thanks for your help,
    > > Bill

    >
    >
     
    Allan Martin, Apr 14, 2004
    #5
  6. "Allan Martin" <> wrote in message news:<8Gifc.45204$>...
    > "MillenniumMan" <> wrote in message
    > news:...
    > > I need help with the step-by-step entries to effect a dividend
    > > distribution to shareholders of an S-Corp. I have seen something
    > > about writing checks to shareholders and then doing an end-of-period
    > > (qtr or yr) journal entry to zero out the retained earnings. I
    > > understand check writing and journal entries, but I do not understand
    > > quite how QB generates "retained earnings". Wouldn't writing the
    > > checks simply reduce the retained earnings?
    > >
    > > Also, I would like to do this distribution without actually writing
    > > any checks. I want the dividend distributed to the stockholder (only
    > > 1 (me)) and then I want to loan that money back to corporation. This
    > > dividend is on the profit of the corporation after I have paid myself
    > > a salary. This dividend is calculated to use up all of the profits
    > > and should make "retained earnings" for the year be zero.
    > >
    > > As the owner of the Corporation, is this dividend considered an "owner
    > > draw" instead of a dividend and handled differently?
    > >
    > > Thanks for your help,
    > > Bill

    >
    >
    > Biill,
    >
    > Ask your accountant how do do this and while you are at it ask him/her what
    > possible reason you can have for doing this in the first place. I'm a CPA
    > with over 30 years of experience and can't think of a single reason you
    > would want to do this. I am however eager to learn something new.



    Thanks for all the input.

    In North Carolina we pay a tax (franchise tax) on "Capital Stock,
    surplus, and undivided profits". I want to divide the profits by
    distributing dividends to lower this tax. I do not need the money
    personally now and can leave it in the corporate money market account.
    By lumping this money together into a single account, this MM account
    pays higher interest rates for balances above $50,000. I can then pay
    back the loan as I need personal cash. By tracking this in a "loan
    from shareholder" account, it is easier for me to see. The retained
    earnings account does not show a balance on the COA and has no
    register.

    How would you use an equity account to track the dividend
    distribution? How would this account effect the retained earnings
    automatic calculation?

    Thanks
    Bill
     
    MillenniumMan, Apr 15, 2004
    #6
  7. MillenniumMan

    James Guest

    "MillenniumMan" <> wrote in message
    news:...
    > "Allan Martin" <> wrote in message

    news:<8Gifc.45204$>...

    > > > I need help with the step-by-step entries to effect a dividend
    > > > distribution to shareholders of an S-Corp. I have seen something
    > > > about writing checks to shareholders and then doing an end-of-period
    > > > (qtr or yr) journal entry to zero out the retained earnings. I
    > > > understand check writing and journal entries, but I do not understand
    > > > quite how QB generates "retained earnings". Wouldn't writing the
    > > > checks simply reduce the retained earnings?
    > > >
    > > > Also, I would like to do this distribution without actually writing
    > > > any checks. I want the dividend distributed to the stockholder (only
    > > > 1 (me)) and then I want to loan that money back to corporation. This
    > > > dividend is on the profit of the corporation after I have paid myself
    > > > a salary. This dividend is calculated to use up all of the profits
    > > > and should make "retained earnings" for the year be zero.
    > > >
    > > > As the owner of the Corporation, is this dividend considered an "owner
    > > > draw" instead of a dividend and handled differently?
    > > >
    > > > Thanks for your help,
    > > > Bill

    > >
    > > Ask your accountant how do do this and while you are at it ask him/her

    what
    > > possible reason you can have for doing this in the first place. I'm a

    CPA
    > > with over 30 years of experience and can't think of a single reason you
    > > would want to do this. I am however eager to learn something new.

    >
    > Thanks for all the input.
    >
    > In North Carolina we pay a tax (franchise tax) on "Capital Stock,
    > surplus, and undivided profits". I want to divide the profits by
    > distributing dividends to lower this tax. I do not need the money
    > personally now and can leave it in the corporate money market account.
    > By lumping this money together into a single account, this MM account
    > pays higher interest rates for balances above $50,000. I can then pay
    > back the loan as I need personal cash. By tracking this in a "loan
    > from shareholder" account, it is easier for me to see. The retained
    > earnings account does not show a balance on the COA and has no
    > register.
    >
    > How would you use an equity account to track the dividend
    > distribution? How would this account effect the retained earnings
    > automatic calculation?
    >
    > Thanks
    > Bill


    there are other states that have this type of tax (Virginia on financial
    institutions for one example) but there are also regulations preventing
    money moving from equity accounts to a majority shareholder's liablity
    account -- be sure you understand before doing this !!!!
     
    James, Apr 15, 2004
    #7
  8. MillenniumMan

    Allan Martin Guest

    "MillenniumMan" <> wrote in message
    news:...
    > "Allan Martin" <> wrote in message

    news:<8Gifc.45204$>...
    > > "MillenniumMan" <> wrote in message
    > > news:...
    > > > I need help with the step-by-step entries to effect a dividend
    > > > distribution to shareholders of an S-Corp. I have seen something
    > > > about writing checks to shareholders and then doing an end-of-period
    > > > (qtr or yr) journal entry to zero out the retained earnings. I
    > > > understand check writing and journal entries, but I do not understand
    > > > quite how QB generates "retained earnings". Wouldn't writing the
    > > > checks simply reduce the retained earnings?
    > > >
    > > > Also, I would like to do this distribution without actually writing
    > > > any checks. I want the dividend distributed to the stockholder (only
    > > > 1 (me)) and then I want to loan that money back to corporation. This
    > > > dividend is on the profit of the corporation after I have paid myself
    > > > a salary. This dividend is calculated to use up all of the profits
    > > > and should make "retained earnings" for the year be zero.
    > > >
    > > > As the owner of the Corporation, is this dividend considered an "owner
    > > > draw" instead of a dividend and handled differently?
    > > >
    > > > Thanks for your help,
    > > > Bill

    > >
    > >
    > > Biill,
    > >
    > > Ask your accountant how do do this and while you are at it ask him/her

    what
    > > possible reason you can have for doing this in the first place. I'm a

    CPA
    > > with over 30 years of experience and can't think of a single reason you
    > > would want to do this. I am however eager to learn something new.

    >
    >
    > Thanks for all the input.
    >
    > In North Carolina we pay a tax (franchise tax) on "Capital Stock,
    > surplus, and undivided profits". I want to divide the profits by
    > distributing dividends to lower this tax. I do not need the money
    > personally now and can leave it in the corporate money market account.
    > By lumping this money together into a single account, this MM account
    > pays higher interest rates for balances above $50,000. I can then pay
    > back the loan as I need personal cash. By tracking this in a "loan
    > from shareholder" account, it is easier for me to see. The retained
    > earnings account does not show a balance on the COA and has no
    > register.
    >
    > How would you use an equity account to track the dividend
    > distribution? How would this account effect the retained earnings
    > automatic calculation?



    On the first day of the new fisal year a journal entry is made zeroing out
    any prior year's distributions and charged to AAA (Retained Earnings).


    Thanks for the heads up on why you would want to reclassify AAA to a
    shareholder loan. I must be honest with you that in my wildest dreams, I
    can't image the State of North Carolina not having any rules or regulations
    prohibiting this type of sham transaction. Even though I am curious, I so
    confident that this is not allowed that I will not waste my time looking it
    up to confirm my belief.




    >
    > Thanks
    > Bill
     
    Allan Martin, Apr 15, 2004
    #8
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