Hi. Your answer is super. I really appreciate it and I do understand the accounting equation. For some reason I am just having trouble getting my head wrapped around the Capital account. Just when I think I understand the relationship between earnings, distributions, and the capital account, my process seems wrong. I started an LLC 3 years ago and if I may ask one more time with more a little more detail, maybe you could supply me with an answer. If you pass on this I will completely understand. The sad thing is I know this should be super easy.
(these won't be actually numbers, but in the ballpark. Also it's husband and wife so I will refer to it as me).
We have personally not contributed any personal assets.
Year 1 had cash earnings of $9500/Ordinary income of $9400/Owners Cap $9400
Year 2 we distributed the Owners Cap $9400(from year 1)/ Cash Earnings $25000/Ord Income $24000/However we placed an asset in to service and with the Sec 179 and Depr it brought our capital acct to 0./
Year 3 Cash Earnings $39000/Owners Cap $28000. Since we knew what the Owners Cap was we distributed the cash to us in Dec of $28000. So....shouldn't the owners cap account reflect a zero balance?
Thank you for your input
