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How to record an S-Corp Distribution in the Ledger?

I originally thought that I could credit the Distribution equity account, and to balance that, debit the Cash in Checking account. However, this causes an increase in both accounts.

Since I wrote myself a distribution check from my business checking account, I somehow need to credit the Cash in Checking account, while at the same time crediting the Distribution account too.

I'm thinking that another equity account, or maybe a liability account must be involved to make this balance correctly.

Any help is greatly appreciated. Thanks!

Reply to
Peter Jones
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Okay, I've been digging through a few accounting books and I'm getting closer to answering this question.

If I'm understanding this correctly, the distribution/dividend must come from the Retained Earnings account. I understand how the Retained Earnings account is maintained through closing the books.

Where things are breaking down for me is this: I currently write myself two distribution checks each month. They usually coincide with with my paycheck (my paycheck makes up the majority of my income).

Is it possible to calculate retained earnings more frequently than once a year, or even a month? I'm guessing that somehow an amount from my Cash in Checking account needs to make its way into the Retained Earnings account, where I can then move it to the Distribution/Dividend/Drawing account.

Am I getting closer?

Reply to
Peter Jones

"Peter Jones" wrote

Cash distributions to the shareholders reduces equity and reduces cash. Credit cash and debit an equity account.

Reply to
Paul Thomas

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