Question on LLC member distributions w/o closing books

[Matt Kowske]

On 02/23/2015 09:46 AM, Buddha Buck wrote:
>
> Sort of.
>
> If no distributions are ever made, and the balance sheet is prepared
> right after the books are (or would be) closed, then the two balance
> sheets would be identical. With books closed, the actual
> Equity:Retained Earnings account would contain the total sum of income
> less expenses over the course of the life of the business.  With books
> not closed, the synthetic Retained Earnings line would contain the
> total sum of income less expenses over the course of the life of the
> business.
>
> If you also regularly distribute the entirety of Equity:Retained
> Earnings to the various owner's equity accounts, then that account
> would only hold the retained earnings since the last such
> distribution. This may, or may not, have anything to do with the
> period the books are open. You may decide to close the books monthly,
> and distribute equity quarterly or annually, for instance.
>

Ok, so the difference then (assuming regular distributions ARE made), is
that with closing the books and managing the Retained Earnings account
is that "Retained Earnings" would truly represent the amount of earnings
retained. The distributions are NOT retained, they are distributed and
this is reflected accurately.

If you go the route of never closing the books, this Retained Equity
line on the balance sheet will not ever reflect the distributions made
and so will not be what has been retained in the literal sense of the word.

Also, if you do have your own Retained Earnings account and close the
books regularly -- does the Balance Sheet show both of these? The one in
your CoA and the one that is calculated automatically? Seems like that
could be a problem.