Discussion:AAA Account versus Shareholder Equity

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Discussion Forum Index --> Accounting Questions --> AAA Account versus Shareholder Equity

SusieQ (talk|edits) said:

10 May 2007
Does SH equity in and S corp. increase and decrease with S corp earnings, expenses, and distributions or is it the AAA account that changes? I need to know what the SH basis in a friend's S corp that is no longer alive. understand the concept of capital accounts. But how does that translate to what is on the books for shareholder equity for an S corp?

I am helping a friend with a disaster and only have the quick books file that shows shareholder equity unchanged from inception, despite the fact that the company is in debt and has made lots of money and lots of distributions in the past.

Lets use an example. Assume an S corp began with SH equity of 40,000. Over the years the company earned net profit of 10,000. That makes the AAA account 50,000. Then they shareholder took distributions of say 48,000. Those would reduce the AAA account to 2,000. Is this correct?

So the AAA account should be adjusted every year. But SH equity remains at 40,000? I am not understanding this concept. Help please.

TexCPA (talk|edits) said:

10 May 2007
[Distributions from AAA]

[S -corp distributions]

[AAA]

Here are a couple of links that should help !!

TexCPA 21:19, 9 May 2007 (CDT)

Kevinh5 (talk|edits) said:

10 May 2007
Discussion:Unequal unproportional amounts taken out of S-Corp I had a discussion about basis here too.

San Diego (talk|edits) said:

4 June 2007
Please hire a professional to do your taxes before you find yourself with capital gains...

Blrgcpa (talk|edits) said:

24 June 2007
Shareholder equity has several components: Capital stock, add'l pd in capital and retained earnings. More info needed to give a reasonable answer.

Add'l pd in capital can't be decreased. There are no distributions from it. If the $40,000 was in there it s/b in there.

AAA is a sub acct of the r/e. All income /loss goes into it in an s corp. If there is a profit in the AAA acct, then a distribution can be made. The shareholder distribution is a contra acct to the AAA.

Get a professional to help you.

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