How to record shareholder or corporate officer distribution?

Forum|Forum|6 years ago
April 29, 2020
1 reply
11 views

The shareholder invested funds in the business and I recorded it as loans payable. The loans payable account already reached to 0 and the money distributed to the shareholder was booked against loans payable and I need to record shareholder distribution. What would be the entry and what account?

QuickBooks Accountant Online

john-pero

Level 12

Once the loan is paid off the additional distribution is against shareholder equity but you want a separate shareholder distribution equity account to track.

DIstributions are out of company profit but are not a company expense, thus the affect the company retained earnings at year-end and if distributions exceed earings then those distributions are regular income to the recipient.

Your entry will be Credit Loan (to return it to 0) and Debit Shareholder Distribution (equity)

For further reading

https://proconnect.intuit.com/community/proseries-discussions/discussion/shareholder-distribution-entry-in-quickbooks-i-have-money-in/00/37481

https://quickbooks.intuit.com/learn-support/en-us/reports-and-accounting/shareholder-distributions-retained-earnings-journal-entries/00/213590

https://www.thetaxadviser.com/issues/2014/sep/case-study-sept2014.html#:~:text=Shareholders%20recognize%20a%20taxable%20dividend,1)%20and%20(c)).

john-pero

Level 12

And this holds for both S and C corp, difference is the C corp pays corporate taxes on earnings prior to distributions (and qualified dividends to shareholders are taxed at personal level) but in S corp there is no corporate tax and earnings before distributions are passed through to the shareholders

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