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Level 8

Contributions/Distributions vs Capital Stock/Retained Earnings in Turbotax Business?

I'm a little confused about what to do with the "Shareholder Contributions" and "Shareholder Distributions" accounts in Quickbooks vs the Balance Sheet in TurboTax. I manually enter everything into TurboTax. For example let's say a two shareholder s-corp was started in 2016 w/ the following:

 

Shareholder 1 contributions   $10,000

Shareholder 2 contributions   $10,000

 

I put those in the TurboTax balance sheet under "Capital Stock" as $20,000.

The following year, 2017, the shareholders put in more money & took distributions (not in excess of their basis)...

 

S/H 1 contributions   $2000

S/H 2 contributions   $2000

S/H 1 distributions   $3000

S/H 2 distributions   $3000

 

In Quickbooks I know it's recommended to close out these accounts to retained earnings at the end of the year. But when I enter the shareholder distributions in TurboTax it automatically changes the retained earnings. So I'm not sure what to do. What should my capital stock look like? This?

 

END OF YEAR 2:

Capital Stock    $24,000     (beginning amount + the $2000 each contributions for the year)

Distributions (not listed on the TurboTax balance sheet but TurboTax automatically subtracts them from retained earnings)?

 

And then the third year balance sheet, what do I do? I started with $20,000 capital stock, then added $4000 in contributions, but they took out $6000 in distributions the 2nd year. Then let's say they each contributed $1000 and took out $4000 each the third year. Would it look like this?

 

END OF YEAR 3:

Capital Stock    $20,000     (year 2 ending amount - year 2 distributions +  current year contributions)

                                                ($24,000 - $6000 + $2000)

And the $4000 each took out in the current year go into the TurboTax distribution questionnaire,  where they carry over to the TurboTax-calculated Retained Earnings automatically and get subtracted from it...

 

Or am I now double-subtracting the Year 2 distributions by subtracting them from Capital Stock, when TurboTax already subtracted them from the previous year's equity (retained earnings)? So I don't need to subtract them from the end of year numbers for the new year? I guess I'm still not entirely sure how TurboTax is calculating things vs how Quickbooks does, and what "Capital Stock" means in TurboTax. Should I NOT be zeroing out my Contributions & Distributions to retained earnings January 1st of each year in Quickbooks, if I'm using TurboTax? They each use different language so I'm confused how these things relate to eachother. Thanks for any advice, it's late and I'm tired.

2 Replies
Level 20

Contributions/Distributions vs Capital Stock/Retained Earnings in Turbotax Business?

I am not at all certain with respect to the treatment of balance sheet items in QuickBooks versus TurboTax, but there appears to be a fundamental misunderstanding of retained earnings in any event (not sure exactly how QuickBooks treats that item either).

 

Regardless, you start with the beginning of the year retained earnings figure, add the net income for the tax year, (if applicable), subtract the net loss for the tax year (if applicable), and subtract distributions to the shareholder(s) for the tax year, you should then wind up with an accurate figure for end of the year retained earnings.

 

Hopefully, that sheds some light on that balance sheet item.

Level 20

Contributions/Distributions vs Capital Stock/Retained Earnings in Turbotax Business?

You also might want to peruse the following PDF, which contains most of the relevant terms (although it does not delve into much detail, it does provide an overview).

 

http://www.bizstats.com/resources/IRSExplanationLineItems.pdf