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Ernest74
Level 1

Distribution of income to partners - Tax differences?

In allocating the years income to Partnership equity accounts I assume it is book income? Are any adjustments made to the equity accounts for tax differences?  Or is it tax income that gets allocated?

 

Thanks!

2 Comments 2
Rustler
Level 15

Distribution of income to partners - Tax differences?

Retained earnings is last years book net income, that is what you distribute to partners with journal entries

 

debit retained earnings
credit partner 1 for his share
credit partner 2 for his share

etc

Ernest74
Level 1

Distribution of income to partners - Tax differences?


@Rustler wrote:

Retained earnings is last years book net income, that is what you distribute to partners with journal entries

 

debit retained earnings
credit partner 1 for his share
credit partner 2 for his share

etc


Thanks for answering. My question, which I guess wasn’t very clear, is do you consider tax differences when posting or is it strictly book income without regard to tax differences? Like meals for example are generally not 100% deductible for taxes. So that would give you a difference in tax income and book income.

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