Bookkeeping

How do I record a payment made by a S Corp on the behalf of a Partnership?

A bank account that belongs to the S Corp has been making payments that belong to the Partnership. I need to know how to record this and when. If you can please give me the journal entry framework to make to record these payments. Also can you please use the correct labeling for the accounts that will be used and explain when to use words that to me mean the same thing such as distribution vs draw, contribution vs investment, etc. This way the accounts will be correct. As far as when, when do I do this in some online searches I read to add up all payments and subtract it from revenue at the end of the year, can you explain how that works if it is and option. What would you recommend to record a JE as they happen or one JE at year end. Thank You!

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Answer

  1. 14 Answers
    This answer is edited.

    I would book the cash transactions as they occur so your clients books are current and accurate at any moment, and so you can reconcile cash monthly. Waiting till the end of the year, depending on the frequency of these payments, could turn into a project. Your client is also more likely to recall the activity as soon as it happens, while it’s a fresh transaction, than waiting till the end of the year.

    If the S Corp is an outside entity making payments on behalf of the Partnership, and not an owner. I would set up a due to/due from account on both sets of books. It could look like this:

    On the S Corp:
    DR Receivable Account = Due to: +$Payment on behalf of Partnership+
    CR Cash:

    On the Partnership Books:
    CR Payable Account = Due from:
    DR Expense Account: +$Payment made+

    If the S Corp is an owner of the Partnership, this is where I would use the equity accounts with the language you brought up.

    On the S Corp:
    DR Investment-in Account: +$Contribution+
    CR Cash:

    On the Partnership Books:
    CR Equity Account:
    DR Expense Account: +$Payment made+

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