376– Previous Taxed Income – “S” Corp.

Net Worth

Synopsis

Account 376

Debits

Credits

  1. Withdrawal of previously taxed retailer profits.

  2. Year-end closing entry in the event of a ‘loss’.

 

  1. Investment of previously taxed retailer profits.

  2. Year-end closing entry in the event that Account 399 – Net Profit (Loss) shows a profit.

 

Remarks:

Shareholders of “S” corporations pay their income taxes on corporate profits as individuals, not as corporations.  As a result of this tax treatment, some retailer owners find the tax situation more favorable.  Adequate legal and tax counsel should be sought before forming a corporation of any status.

 

The reinvestment of “S” corporation income will take the form of a loan to the corporation from the owner(s).  This amount will be reflected in Account 347 – Long Term Debt Owners/Other.

Note: