Distributions In QuickBooks Online Explained 

Thank you!

Hey Dennis. I'm sure I've discussed it elsewhere, but the quick answer for s-corps is that booking it as a loan is "safer" but the intention has to be to pay it back. You might want to check out my video and e-book on S-Corps here: www.nerdenterprises.com/offers/6DXVvuyg/checkout

Hi! Yes. If it's an Equity account in QBO, it's an Equity account in the tax line mapping.

Hi sorry I missed this earlier. There is no hard and fast rule on this, but the idea of classifying it as a loan is that the intention is for it to be repaid.

Hi! dividends are really the same as distributions. We think of Dividends being made to shareholders in a publicly traded company. You can do this with QBO, but you will need a detailed Equity section if not another app to track the kind of details you need. To be honest, I would book the Dividends as a single Dividends account in QBO. The I would track these details in a database like Airtable. You can structure it with a nice audit trail so you can easily subtotal information in Airtable in a way that ties back nicely to what is in QBO.

I'm not sure what you're asking. Salaries are an expense, so they would go to Officer's Salaries. Distributions go to Equity such as Shareholder Distributions. Let me know if that answers your question, or feel free to clarify it further.

So sorry for the very late reply, but somehow I missed this until now! I'd have to see this to be sure, but it sounds like that is just your balance forward in the Equity account. Balance sheet accounts are cumulative, so whatever balance is in there going into the year, will remain, and then it will be increased or decreased based on current year activity.

If you are using QuickBooks then from the Distributions account, you can double click to see the transaction detail. Then adjust your date range to the year you want to look at.

I've created new equity disbursement accounts for each year. "Jane Doe Partner Disbursements - 2018" and another for 2019... both a sub-account of Jane Doe's equity account. I still hate that it shows as a negative.

Hi! The very definition of a Distribution is that it's not payroll. If you pay them with a paycheck then it's Officer's Salaries.

So sorry I missed this. If you are using QuickBooks Online, the loss will flow over to the "Net Income" line in the Equity section of your balance sheet as of 12/31 (assuming a calendar year). Then on 1/1 QuickBooks will automatically move this amount into retained earnings. So there is nothing you have to post, unless you want to distribute the net income / loss to some other equity account. This is done when there are two or more owners in the business.

@@nerdenterprises Thanks so much.. I see how it all moved over to retained earnings. Just one more question if you don't mind! I have a personal owned vehicle and had $1173 in mileage deductions for 2019. It was listed on my 1120S form as a deduction. In order to get my Quickbooks to balance, I had to show that $1173 as an expense to lower my net income to match the tax filing. Is that $1173 considered a shareholder distribution? I'm trying to figure out what kind of journal entries I need to make to get that money out of the books. Thank you!

They each get a separate K-1, so I would think they do need to take them equally, yes.

The equity accounts are cumulative, so whether you close it out or leave it, the negative number will keep growing as you take out distributions. Closing it to Retained Earnings will only make retained earnings grow more and more negative (unless your cumulative net income exceeds your distributions). The reason I prefer to keep it in distributions, is that this way the retained earnings number is purely the cumulative of all prior year net income / loss. So, if you run a P&L for all time grouped by year, you should be able to tie that out in total to retained earnings. Also this lets me see everything they've taken out of the business for all of time. If I want to see what it was just for this year, I can drill into the number from the balance sheet and the "Amount" column total is just for the current year. It won't get out of balance because your Total Equity will be the sum of distributions and retained earnings. Finally, what this also does for me is it gives me a nice bird's eye view of the Equity section as in: This is the total cumulative of earnings for all of time. And this is the total the owner(s) have taken out for all of time. Then if the distributions exceed the retained earnings by a lot, we can do some "reasonableness" testing like, is there debt on the books that explains how this difference was funded? Or were there contributions made that were later taken out as distributions (I like to see those in a separate account too). So in the bigger picture, keeping it all separated gives me good data about the company.

Follow up comment, because it HAS been a few years and I forgot exactly what I taught here until I had a quick look. So if anything in the example in this video we have two shareholders so what we do is the opposite of closing out to retained earnings. We actually take what closes out to retained earnings from the P&L each year, and on the 1st of the following year, we zero out that amount and split it between the shareholders in proportion to their ownership. This makes the Equity section super clean.

@@nerdenterprises Thank you so much for responding. I think what I have been missing is the "passthrough" of disbursing to the capital accounts first and then distributing. So, I should disburse from net income/retained earnings to the respective capital accounts first, then take distributions. Is that correct? There are two owners who happen to be married with combined finances, so it is easy to just lump it all together, but after watching this I see how it is so much cleaner to split it out between them. And easier to see compliance as well! I'm sure you will hear from me more as I take your free mini-course :)

@@danaewhitteker9710 Well it sort of naturally happens in the other order. They take distributions out during the year, and then when the year closes you distribute the net income from R/E to their respective capital accounts in proportion to their ownership. It sounds like you've got the idea. I am here whenever you need help!

Hi. Normally we do this with a journal entry. Debit Retained Earnings and Credit Owner's Equity. Do this on 12/31/xx and the next day (1/1) Net income will close out to retained earnings so retained earnings will zero out.

Hi my accountant closed out the capital accounts to retained earnings, how do I go about reversing it to reflect your work in this video?