Brian,Michael I did misunderstand Brian's original question.
My comment below is a general accounting perspective based on general accounting theory for corporations ( Financial Accounting Horngren etal 5 th edition, Accounting Theory Godfrey etal Wiley Australia (Accounting Theory Kahn Wiley US looks to be a US equivalent) ) and may be affected by specific corporation's law requirements/arrangements specific to the jurisdiction. The general accounting rationale is to keep clearly separate: a contributed capital - raised from financing transactions; b earned capital - derived from profit making activities. The earned capital consists of the unappropriated profits or retained earnings. Retained earnings may then be appropriated for specific purposes. Retained earnings does not represent a particular asset. Certain transaction types will effecct transfers between earned capital and contributed capital (share dividends, reinvestment etc.). If the corporation wants to appropriate money from retained earnings for specific purposes, it will normally establish reserve accounts which would normally appear immediately above retained earnings in the balance sheet (this may depend on local practice). Reserves are generally established for purposes like reinvestment, dividends etc. To establish the reserve accounts . Retained Earnings is debited and the reserve account is credited. Unused reserves are usually returned to the Retained Earnings account. When money is used to increase long term assets for example there would normally be a credit to a bank account and a debit to the appropriate long term asset account and a corresponding debit to the appropriate reserve account and a credit to the share capital account. That is money has been transferred from the earned capital of the corporation into the share capital by this transaction. Similarly if there is a reserve account for Dividends Payable, money is allocated by a debit to Retained Earnings and a credit to the reserve Dividends Payable account and Dividends Payable will be debited and Share capital credited (again a transfer of earned capital to contributed capital) when the dividend is paid along with the corresponding credit to a bank account and debit to share capital (probably Brian's Shareholder Distributions which is a contra account) representing the actual payment to the share holder. GnuCash where it is not using the close books and explicit accounting above should be calculating any reductions to Retained Earnings from the Shareholder Distributions as Brian implied. Whether this can be done generally enough in the reports to fit all user situations is the real question? David Cousens . ----- David Cousens -- Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.