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Multiple Owner's accounts & Profits (Owner's Equity)

S_ColemanS_Coleman Member Posts: 2

I have a company that has 4 owners. I have set up the 4 Owner's Investment and Draw accounts for each owner to properly track investments and draws, but I'm hesitant to set up Retained Earnings into 4 accounts if the profits will not automatically be allocated to each owner account. Will I have to do a journal entry at the end of the year move profits from the primary retained earnings account to the perspective equity accounts for each owner or will this automatically allocate? The good thing is the partnership profit allocation is 25% for each owner's so I've been considering keeping profits in one account instead of splitting this because I also want to keep the financial statement presentation clean. Any additional insight on this?

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Comments

  • MikegMikeg Member Posts: 995 ✭✭✭

    @S_Coleman,
    You do not need to set up a separate retained earnings. The sum of partners capital (plus/minus) drawing on the the K-1's should agree back. Partners capital is presented in sum on Form 1065.

  • S_ColemanS_Coleman Member Posts: 2

    Thanks, @Mikeg !

  • MikegMikeg Member Posts: 995 ✭✭✭

    Sure thing. Let me know if you need assistance preparing Form 1065. Partnerships are one of my forte.

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