What's best way to set up partner's capital accounts
MrPage
company's Q99 normal business system. Should I use an asset account to contain
all 10 partners? Or, perhaps set up a category for each partner within the
checking account? Suggestions are greatly appreciated.
Fred Smith
owes the money to the partner.
Second, if all partners share the capital account equally, I would set up
one account. The partners would know that they are entitled to 1/10th of the
funds in the account.
If they share unequally (such as they are permitted to make unequal drawings
from the account), I would set up10 separate accounts.
You don't want categories for each partner -- categories are income and
expense accounts.
You could set up a class for each partner, but I don't think it will help
with the capital accounts -- classes work best for income and expense
accounts. You could, for example, use classes to keep track of how much each
partner spends on autos, or stationery, etc.
Regards
Fred.
"MrPage" <mrp...@aol.com> wrote in message
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R. C. White
In addition to Fred's comments, I'd like to add a few, based on 30 years of
experience in advising small to mid-sized partnerships on accounting and tax
matters before my retirement a decade ago.
Accounting for the simplest partnerships is very simple. However, even a
slight deviation from "simple" can make partnership accounting quite
complex. And, the tax ramifications can be mind-boggling!
Quicken was designed as a simple checkbook program for a single owner. Its
handling of those functions is very good, with one major weakness - see
below. Over the years, Intuit has responded to customer demands and added
on features to handle such things as investments and loans, and has become
pretty good at handling income tax considerations for individuals. It has
never tried to handle complications specific to partnerships, corporations,
trusts, estates, or other type of owners. So long as you recognize these
limitations and use Quicken only to handle the checkbook aspects of your
partnership, it should be able to help you a lot. If the partnership starts
to get even a little complicated - like certain income, assets or debts
being shared unequally - then be sure to get competent professional advice!
I have no experience with QuickBooks; it might be more suited to your
situation.
The major weakness of Quicken is one of its strengths: its flexibility.
Or, as accountants would say, its lack of an audit trail. Any transaction
recorded can be deleted without a trace. Or, it can be changed, again
without a trace as to who did it, or when, or why. So long as the Quicken
file is for just me, that is good. But, if partners are looking over my
shoulder, then I need a more permanent record that can be audited. At a
bare minimum, for partnership books kept on Quicken, I'd want frequent
(monthly?) printouts of transaction lists, along with any reports.
It has often been said that a partnership is like a marriage, and there is a
lot of truth in that analogy. The beginning and middle years of a marriage
or a partnership are generally easy to manage. But, things get awfully
sticky at and just before a dissolution - of either. That is where you will
learn the weaknesses of your partnership accounting; even a friendly
dissolution can be an accounting and tax nightmare. You don't want to be
yelled at by 10 partners - AND the IRS!
Be sure to get good accounting advice for your partnership. Your question
seems to indicate some naiveté in this area, so you may need to discuss it
with a lawyer, too.
RC
--
R. C. White, CPA
(Retired - no longer licensed to practice)
San Marcos, TX
r...@corridor.net
"MrPage" <mrp...@aol.com> wrote in message
news:20020114162416...@mb-mo.aol.com...
FrankV
as a retired CPA myself, I could not agree more with your comments - in some
sense Quicken is "accounting", in many ways it is not "accounting".
Believe it or not, I had been using DacEasy for a number of years (and that
IS a full featured accounting package), but my kids conned me into Quicken
DeLuxe, which I am getting used to now! Oh, how I miss a good old-fashioned
"adjusting entry"! And all the other stuff we accountants are used to.
But I will stick with it until I die, which may not be that far off ...
Thanks for your comments from a TRUE accountant, not a QUICKEN accountant.
Frank V
"R. C. White" <r...@corridor.net> wrote in message
news:3c445877$1...@nntp.corridor.net...
R. C. White
Thanks for your comments. ;<)
But I think we agree that Quicken is much better for MOST people than a
"true" accounting program. Few would have time to invest years in the
education and training that would be required just to prepare their own
personal financial statements "in accordance with generally accepted
accounting principles". For MOST users, Quicken produces more-practical
information.
The problem for the layman is that it is not always easy to recognize the
point at which Quicken becomes inadequate or inappropriate. Partnership
accounting - other than the simple checkbook functions - is one area that
can quickly expand "outside the lines" of Quicken's abilities, with no
warning signs to the unsuspecting user. Subchapter K was NOT explained to
the programmers writing Quicken. :^{
You could always make your adjusting entries in a special zero-balance Cash
Account. Heck, you can even make it a one-sided, out-of-balance entry if
you want. Quicken won't mind! ;^)
RC
--
R. C. White, CPA
(Retired - no longer licensed to practice)
San Marcos, TX
r...@corridor.net
"FrankV" <fvorl...@home.com> wrote in message
news:zC218.6031$B21.7...@news1.rdc1.fl.home.com...
MrPage
~Page
Austin K. Williams
I do extensive partnership accounting with Quicken 6 and it can handle
anything you can throw at it. Regarding initial setup, give each partner a
separate capital account (use Liability account type). This will allow you
the flexibility to handle multiple layers of capital accounting. For
example, when one partner's interest is purchased by an outsider at FMV, you
can get into a 754 depreciating asset situation where the "new" partner has
different numbers than the "old" ones. Q can handle it but I can see it
getting messy if all in one account. The CPAs make a good point wrt audit
trailing but without getting into a mainstream accounting package, you can
do just fine with Q. Make sure you generate lots and lots of reports and
distribute them to the partners on a regular basis. Depending on the
sensitivity of the enterprise, you might consider generating a complete
transaction record on paper every year, then starting a new master file with
carryover balances for the next year. If the excrement ever impacts the
propeller, the transaction history records can be used as input to a
mainline accounting program to satisfy the lawyers. Good luck.
Austin
"MrPage" <mrp...@aol.com> wrote in message
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