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Posted by Peter Jones on August 9, 2007, 9:49 pm
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> I originally thought that I could credit the Distribution equity
> account, and to balance that, debit the Cash in Checking account.
> However, this causes an increase in both accounts.
>
> Since I wrote myself a distribution check from my business checking
> account, I somehow need to credit the Cash in Checking account, while
> at the same time crediting the Distribution account too.
>
> I'm thinking that another equity account, or maybe a liability account
> must be involved to make this balance correctly.
>
> Any help is greatly appreciated. Thanks!
Okay, I've been digging through a few accounting books and I'm getting
closer to answering this question.
If I'm understanding this correctly, the distribution/dividend must
come from the Retained Earnings account. I understand how the
Retained Earnings account is maintained through closing the books.
Where things are breaking down for me is this: I currently write
myself two distribution checks each month. They usually coincide with
with my paycheck (my paycheck makes up the majority of my income).
Is it possible to calculate retained earnings more frequently than
once a year, or even a month? I'm guessing that somehow an amount
from my Cash in Checking account needs to make its way into the
Retained Earnings account, where I can then move it to the
Distribution/Dividend/Drawing account.
Am I getting closer?
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