Thank you for your reply, it was very helpful. I set it up as you suggested, and recorded the journal entries. The retained earnings was reallocated to equity for each partner, and then I debited their equity account and credited their distribution account in the amount to be distributed. After cutting the profit distribution checks, what journal entry do I use to reduce operating cash by the check amount? As of now my Operating Cash is out of balance by the amount of the profit checks that were cashed.