USA Okay to cancel shareholder's debt against shareholder's equity?

[michaelbluejay]

Let's say there's an S Corporation with a single shareholder, a $200 balance in "Loans to Shareholders", and a $300 balance in Retained Earnings. I presume it's okay to cancel the shareholder's debt by canceling against the shareholder's equity, by crediting $200 to Loans to Shareholders and debiting $200 to Retained Earnings, right?

 

[michaelbluejay]

I found the answer elsewhere: Instead of debiting Retained Earnings directly, I debit Distributions, and then at the end of the period, close Distributions to Retained Earnings.

 

[Werner Reisacher]

Good for you. As long as you do not take it out of the paid-in capital, you are fine.