Question on LLC member distributions w/o closing books

[Wm]

Sun, 1 Mar 2015 04:26:51 
<CAAyPE3CJ7e2MRYSCSgytzLrECuO6HiBi2AWfJW4U82DQcjVdoQ at mail.gmail.com> 
Buddha Buck <blaisepascal at gmail.com>

>On Sat, Feb 28, 2015 at 5:29 PM Wm <wm+gnc at tarrcity.demon.co.uk> wrote:
>
>> Tue, 24 Feb 2015 23:01:10
>> <CAAyPE3DSzxYwWxUX6uJ0UkDg63p0r6-MvRqayyavRs23CZgJtw at mail.gmail.com>
>> Buddha Buck <blaisepascal at gmail.com>
>>
>> >As near as I can tell, the one thing which is not dealt well with the
>> >not-closing-books and existing reports is the issue of dealing when
>> >retained earnings cease to be retained.
>>
>> It's been a few days now and I'm wondering what you meant by the last
>> bit.  If I understand your "not dealt well" I think the answer is in the
>> Balance Sheet.  If the book produces or loses money the account, virtual
>> or otherwise where that is shown is an Equity account.  Ergo the
>> distributions or liability to distribute should be reflected in Equity.
>>
>
>The issue is deciding where to distribute the retained earnings from.
>
>Keeping in mind that this question arose in connection with an LLC with a
>small number of owners, what it seems like is that when earnings are
>distributed to the owners, we'd like the balance sheet to go from something
>like:
>
>Total Assets 1,000,000
>======
>Total Liabilities 100,000
>------
>Retained Earnings 800,000
>Owner 1 Equity 50,000
>Owner 2 Equity 50,000
>Total Equity 900,000
>======
>Total Liabilities and Equity 1,000,000
>
>To something like
>
>Total Assets 9,000,000
>=======
>Total Liabilites 100,000
>-----
>Retained Earnings 700,000
>Owner 1 Equity 50,000
>Owner 2 Equity 50,000
>Total Equity 800,000
>=====
>Total Liabilites and Equity 900,000
>
>With book closings, this could be accomplished by a transaction like:
>
>2014-03-31 Distribute Earnings to Owners
>  Pay Earnings To Owner 1, Credit Asset:Checking $50,000
>  Pay Earnings To Owner 2, Credit Asset:Checking $50,000
>  Distribute Earnings, Debit Equity:Retained Earnings $100,000

Yes, our own John Ralls does something similar (see recent-ish posting)

>Without book closings, there is no Equity:Retained Earnings account, so the
>above transaction won't work. There is no clear guidance as to what to do
>instead.

Not quite.  The closing of the books, along with sacrificing of virgins, 
killing of the first born of everyone that disagrees with you and so on, 
isn't really necessary.

In gnc you can use Tools / Close book daily, weekly, monthly and so on.

What you won't know from what gnc produces is whether the distributions 
are legal, etc.  But I think you are one of the people that knows that.

>> All the same thing happening just different ways folks are used to
>> seeing it represented.

Here is an experiment.

Use Tools / Close book on a daily basis, make the distribution and 
delete the closing transaction, what do you end up with?

To re-coin a phrase: what happens in the Equity account should remain in 
the Equity account.

-- 
Wm...