Closing S Corp Question

Good day, Dawn.

You can create a journal entry to separate the contributions and withdrawals. Then, post them to the correct account.

If you aren't sure about the journal entry, you can find the date when your balance sheet went out of balance. Here's how: 

1. Go to the Reports menu and select Company & Financials and then Balance Sheet Summary.
2. Select Customize Report.
3. On the Display tab, from the Dates ▼ drop-down, select All.
4. Go to the Report Basis section. If your balance sheet is out of balance in accrual only, select Accrual. Otherwise, select Cash.
5. In the Columns section, from the Display columns by ▼ drop-down, select Year.
   Select OK.
6. Compare your Total Assets to Total Liabilities & Equity. Find when your balance sheet goes out of balance.

Once you find the year, follow the same steps to narrow down the exact date.

1. Repeat steps 1 through 6 above. This time, from the Display columns by ▼ drop-down, select Month.
2. After you find the month, follow steps 1 through 6 again. Now, select Week.
3. And finally, once you find the week, repeat the steps again. This time, select Day.
4. Now that you have the date your report went out of balance, continue to step 3.

Once done, find transactions that are making your balance sheet out of balance. To continue with the process, please browse this article and follow steps 3 to 5: Learn how to fix your balance sheet when it’s out of balance in QuickBooks Desktop. 

About your FUTA returns, you can go back to us this January 2023. Then, ask for your annual payroll forms so you can file your year-end taxes.

Upon sharing this, I still recommend discussing this issue to your accountant. They can provide specific instructions to zero out your balance sheet and make sure your transactions are correctly recorded on your books. If you don’t have one, we can help you find an accountant.

Let me know if you have additional questions by commenting below. I'll be right here to provide the information that you need.

Thanks for replying Mary,

The balance sheet is balanced, though. Assets equal liabilities and equity. I guess my biggest issue is can I do journal entry between my loan from shareholder and retained earnings. Trying to zero out to close permanently.

Dawn wanted to know how to close out Loan from Shareholder. I also am interested in your answer. Specifically, do you just debit the Loan from Shareholder and credit Retained Earnings? It probably has a significant debit balance from Dawn lending the S corp money over the years. 

I think Dawn was asking about closing out the “Loans FROM Shareholder” account. Does she just debit it and credit Retained Earnings? RE probably has a substantial debit balance from her making loans to the S corp over the years. I have an S corp client with a similar situation and am interested in your answer. Thanks  

I'm surprised that I got an email on this! But, I am happy to share what I did because I did alot of homework on this. NOTE that I did not have negative equity. I sunk hundreds of thousands of dollars into the business over a 20 plus year period. My entries: