Form 1065 Sch L Balance Sheet Issues

[flipz]

I am not able to get Sch L, Balance Sheet to get in balance.  I have assets but no liabilities. 

                 I have one depreciable asset.

 For Ex:    Purchase Price $50,000.

                 Accum Depr    ($25,000)

                               Net      $25000.

                             Cash          2000.

No liabilities, no payables, and paid out cash distributions to member so Capital account is zero.

How do I balance this??

THANKS

[Anonymous_]

Something is awry somewhere.

Assets should equal Liabilities and Capital (it is unclear as to why your Partners' capital accounts is zero).

[flipz]

If during the year we made, let's say, $10,000, and distributed the earnings in December would that not make the capital account 0?  

Thank you!

[sammyls1525665]

ENTER $27000 IN THE PARTNERS CAPITAL ACCOUNT.  YOU WILL THEN BE IN BALANCE.

[Anonymous_]

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@flipz wrote:

If during the year we made, let's say, $10,000, and distributed the earnings in December would that not make the capital account 0?  

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That would be a wash for the current year. However, you should have started with a higher figure and, as @sammyls1525665 mentioned, adding the figure to your capital account should result in your Schedule being in balance.

[DawnC]

Here is an example of how your profits (net income) and capital accounts interrelate - If you are one of two 50/50 owners of XYZ & Co. LLC and you contribute $10,000 to help start the LLC, your initial capital account balance is $10,000.  If you take a $2,000 owner draw, your capital account balance decreases to $8,000. If at the end of the first fiscal year, the LLC has $10,000 in profit, the LLC adds $5,000 to your capital account to reflect your share of the profits, and your capital account balance is $13,000.

When you contribute assets (cash, equip, etc) to the business, your capital account goes up and when you distribute or draw assets, the capital account decreases.  The accounting equation, Assets = Liabilities + Capital means that the total assets of the business are always equal to the total liabilities plus the owners' equity of the business.  

[flipz]

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

[Anonymous_]

Perhaps you can clarify what you wrote in your original post because something appears to be missing.

You have an asset purchase of $50,000.