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J
JB155
October 15, 2022
Question

is partner distribution and partner's draws the same?

  • October 15, 2022
  • 1 reply
  • 0 views

I am creating the equity accounts for my partnership. 

I understand that I need the

Partner's Equity

--Partner #1's Equity (sub account)

--Partner #2's Equity (sub account) 

 

I am making the investment and draw accounts, but the only options I see under "detail type" are "Partner Contributions" and "Partner Distributions".

 

I have a feeling the Partner's Draws and Partner distributions are not the same thing and that the Distribution

account is meant for an end of year thing. If so, what "Detail type" Should be chosen?

1 reply

Rustler
Rustler
October 15, 2022

IMO the equity account structure should be set up like this

Equity
>>partner one name
>> >> equity
>> >> equity draw
>> >> equity investment
>> partner two name
etc etc


Partners take value from the company as they wish during the year, that is booked to the partner equity drawing account.

 

Beginning of the new year, after all IRS type entries are made, then you distribute Retained Earnings (last years net profit) to the partners with journal entries. The partnership agreement is required to specify the percentage per partner for income and loss. Debit retained earnings, credit partner equity for their share

 

If the partner put money or value into the partnership, then partner equity investment is the offset account for that action

 

After retained earnings is distributed, then roll up the drawing and investment accounts per partner to the partner equity account using journal entries.  

 

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