There are two capital accounts. Let's say $100 each. Year end distributions take place and the distribution checks are cashed. What are the entries to reflect this.
To reflect the distribution of capital accounts, you need to follow these steps:
1. Determine the amount of distribution: In this case, each capital account has $100, so the total distribution will be $200 ($100 for each account).
2. Debit the capital accounts: You will reduce the capital accounts by the amount of the distribution. In this example, you would debit each capital account by $100.
3. Credit the cash account: Since the distribution checks are cashed, you will credit the cash account for the total distribution amount of $200.
The journal entry to reflect this distribution would be as follows:
Debit Capital Account A $100
Debit Capital Account B $100
Credit Cash Account $200
This entry will reduce the capital accounts by $100 each and increase the cash account by $200, reflecting the distribution of capital among the partners or owners.