AccountingBLOCK - Accounting Forums

Hey folks,

I need help with something which is bugging me. I have an imaginary corporation created as I am playing with Quickbooks these days. I am stuck, shareholder distribution transaction. Here is what I did:

1. I created "Shareholder Distribution" account under Equity group of accounts. Question: This account would be Other Liabilities or Other Current Liabilities?

2. I created a check to myself using Shareholder Distribution account. Then I created General Journal Entry crediting Shareholder Distribution and debiting Retained Earnings, but received message from quickbooks that I generally should not use Retaining Earnings account for transactions myself. Message said that this is some special type of account quickbooks maintains internally.

Am I on the wrong path with all this?

Thanks!

Delete the Shareholder Distribution account.

QuickBooks will record all your income and expenses for the year, and on December 31, 2007, all of these things are "reconciled" automatically and it is posted to Retained Earnings. This is the profits of the business.

To take a distribution, write out a check to yourself with the account being affected as "Retained Earnings". Be careful that you don't exceed whatever is in this account as while "Retained Earnings" goes negative, there is actually a consequence for it.

Keep a note to yourself later on that you made this distribution. It should be pretty easy to find as there are hardly any transactions in Retained Earnings. Take a look at it year end.

QuickBooks doesn't like you playing with the Retained Earnings account, but it'll let you do it. For example, partnerships often need to do this because it also creates a Retained Earnings account, but with partnerships, those "retained earnings" are divided amongst partners -- so "retained earnings" isn't really an appropriate account for a partnership, yet QB creates it.