Very basic accounting entry questions

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#1
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First of all, I have to clarify that I do not provide bookkeeping service. Through the years, I have forgotten most of the debit/credit journal entries that I learned in college. Therefore, I am going to ask two very basic journal entries questions here. Please be bear with me.

(1) When a shareholder takes salary from a S-corp, do we credit 'cash account' and debit 'wage expense'?

(2) When a shareholder takes distribution from a S-corp, do we credit 'cash account' and debit 'retained earnings'?
 

#2
CathysTaxes  
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2). Credit Cash Debit Shareholders Distribution.
Cathy
CathysTaxes
 

#3
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Agree with Cathy, debit distributions account. The distribution account would be part of the equity section on the balance sheet, and at year end, I close current year distributions into retained earnings (or AAA).
 

#4
Andee  
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Agree with others. On the wages, you'll journal those the same as any other wages, although I normally have a separate G/L Acct for shareholder wages. Debit wages, credit the tax liability accounts for FWT, FICA, SWT deductions and credit cash for the net paycheck amount.
 

#5
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Andee wrote:Agree with others. On the wages, you'll journal those the same as any other wages, although I normally have a separate G/L Acct for shareholder wages.


As do I. Makes it easier when preparing tax returns, plus for overall business management.
 

#6
Keyad22  
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I think we have two answers here! Which one do you agree with?
Debit to Salary expense or debit to shareholder distribution?

We usually Debit: Salary -Shareholder/Officer
Credit: Cash

1. Usually, the shareholder is also an officer of the S Corp. This $ will show up on 1120S page 1 line 7, form 1125-E will be attached.

2. Have you ever re-classify prior shareholder distributions as shareholder wages and/or employee reimbursements sometimes? We did.
 

#7
Joan TB  
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Keyad22 - there are two answers because there were initially two separate questions. I don't think there was any confusion in the responses. Salary goes to salary, distributions go to the equity section.
 

#8
Keyad22  
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Thanks, Joan.
I just skip several lines from the beginning and total misunderstood there're two different questions!
 


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