Is owner distribution an expense?

Understand the Problem

The question is asking if owner distribution is considered an expense. This touches on financial accounting concepts regarding how distributions to owners or shareholders are categorized in accounting records.

More Information

Owner distributions are listed on the balance sheet and not on the profit and loss statement because they don't impact business profitability or taxes. They represent a share of profits paid to the owner.

Tips

A common mistake is to record owner distributions as expenses instead of entries on the balance sheet, which can lead to incorrect financial statements.

Sources

• What are Distributions & How to Pay Yourself as a Business Owner? - pursuitlending.com
• Are personal distributions a business expense? - Maine Beancounters - mainebeancounters.com
• Benefits of Owning an S-Corp: Taking Distributions - myclearpathadvisors.com