LLC equity accounting

[Matt Kowske]

I think I may have figured this out right after I sent it, but could use
some verification from others.

The second scenario I was working through would look like this:

LLC:Equity:Member A -> 7,000 credit
LLC:Assets:Checking -> 7,000 debit


LLC:Equity:Member B -> 10,000 credit
LLC:Assets:Checking -> 10,000 debit

Now, Member A does have 3,000 less equity than Member B, upsetting the 
50/50 split, but can be re-established and accounted for in the final closing transaction:

LLC:Assets:New Property -> 100,000 debit
LLC:Liabilities:Mortgage -> 80,000 credit
LLC:Assets:Checking -> 17,000 credit
LLC:Equity:Member A -> 3,000 credit

Balances out... seems right?


On 01/13/2016 12:10 AM, jmk wrote:
> This is an accounting question. Here is the scenario: there is a 2
> member real estate LLC and each member has 50% equity in the business.
> When a property is purchased funds are normally transferred into the LLC
> Checking from each member (50% of the closing costs for each), which
> increases each members equity by that amount. A check is then written at
> closing time from the LLC Checking. E.g.
>
> Closing costs: 20,000 (each member responsible for 10,000)
>
> LLC:Equity:Member A -> 10,000 credit
> LLC:Assets:Checking -> 10,000 debit
>
> LLC:Equity:Member B -> 10,000 credit
> LLC:Assets:Checking -> 10,000 debit
>
> LLC:Assets:Checking -> 20,000 credit at time of closing
>
> This all works wonderful for us as equity is kept at 50% for each
> member. Now suppose that member A has gotten their real estate license
> and on the next deal is going to waive her 3% commission that the seller
> would normally have to pay to the real estate brokerage. Instead this 3%
> will be paid by the seller and go towards reducing our down payment in
> the HUD statement. Essentially, we get a 3% credit on the buyer (us)
> side of the transaction. So now instead of 20,000 for closing costs it
> is 17,000 (3% of this 100k purchase is 3,000). I'm having a terrible
> time trying to account for this commission and keeping equity 50/50
> still. Member B would still need to deposit their 10,000 but Member A is
> now only responsible for 7,000, as 3,000 of the 10k is her commission
> for the sale, paid indirectly to her by way of a reduced down payment.
>
> LLC:Equity:Member A -> 10,000 credit
> LLC:Assets:Checking -> 7,000 debit
> (here I need to account for the 3,000 somewhere -- and is where I'm
> getting lost)
>
> LLC:Equity:Member B -> 10,000 credit
> LLC:Assets:Checking -> 10,000 debit
>
> LLC:Assets:Checking -> 17,000 credit at time of closing
>
> My question is how I can account for this with double entry bookkeeping.
> I must be missing something.
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