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Martha92
January 12, 2024
Question

Closing out owners' distribution account

  • January 12, 2024
  • 1 reply
  • 0 views

Hello!  I could really use some expertise on how to handle this situation:

 

I have picked up a new small client and I need to close out their owner distributions, but I am not sure how to handle it.  They keep their books open for 24 months, so they just closed 2022 on 12/22/23.  It is now 1/11/24, can I close out the owner distributions account now...or did that need to be done immediately after closing the books? 

 

They have these 2 equity accounts:

Retained Earnings with a balance of ($1,170,581)

Shareholder Distributions with a balance of $1,060,040

 

 

1 reply

Rainflurry
Rainflurry
January 12, 2024

@Martha92 

 

Your question leads to more questions.  Your client has a negative balance in R/E and a positive balance in Shareholder Distributions (SD)?  Are you sure that's not the other way around?  Shareholder Distributions (SD) is a contra-equity account and normally carries a negative balance.  SD carries a negative balance because it is the debit entry to the credit entry to cash or the other asset distributed.  If it's positive, how did they do that?  What entries were made to increase distributions? 

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