My S-corp owns a brokerage account that is managed by an advisor. Every quarter, I receive a statement showing the advisor fee taken out, any interest and/or dividends applied, and any loss/gain to the market value of the account. There is buying and selling by the advisor going on all the time in the account, so I do have tax ramifications that must be accounted for on Form 8949 of my 1040 return as a result of a 1099-B which I received.

Do I need to record any of this in Quickbooks for the S-corp? For instance, in the first quarter after the account was opened, there was $143.44 advisor fee, $.92 interest & dividends, and $860.66 in loss of market value. Do I just keep showing the opening balance of the account on the balance sheet, or should I adjust it every quarter to reflect its true value? If the latter, what accounts should I debit/credit to accurately record these intra-brokerage-account transactions?

Any help would be most appreciated!

#1; You need to create your adjustments.


#2;As you know, S-Corps can choose an accounting method best suited to report the income and expenses of the company. S-Corps are not required to use the accrual method of accounting; they may choose the cash method or a hybrid method of accounting if those methods of accounting. A bookkeeper's job is to accurately/timely record all inflows and outflows of cash into the S corp so shareholders may report profit and loss statements to the IRS. Keeping track of financial information is essential for any business. Once the balance sheet is done, that doesn't always mean it's done. Businesses are constantly changing and not only does the business need to be flexible and adapt to the changes -- whether good or bad -- but the business's financial documents must reflect those changes. Reviewing your financial documents at least once a month and making the necessary changes will keep you up-to-date and avoid trouble once tax time or a shareholder meeting comes along.

Hypothetically, if the investment account has a gain and I record the adjustments in Quickbooks for the S-corp, the increase in net income will flow through to me, and I will be taxed for it. But if I already am going to need to fill out a form 8949 (as a result of receiving 1099-B) on my 1040, won't that create a scenario where I will be double-taxed? Or is the Form 8949 supposed to be filled out and submitted as a part of the S-corp's tax return?

#1;Correct; QuickBooks does not prepare tax return. But it does interface with tax software for business. Sch K-1 of Form 1120S is used to report each shareholder's pro-rated share of net income or loss from an S-Corp, along with various separately stated income and deduction items and Shareholders report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. Sch K-1 can also be used to summarize a shareholder's beginning and ending stock basis for the year.

#2;Your LT(ST)CG is reported on Sch K1 of 1120S line 7 or 8a and is reported on Sch D line 12 for the net long-term capital gain (loss) or on line 5 for Net Short-Term Capital and is also reported on form 894


#3;correct as mentioned above.

I'm still fuzzy on the exact mechanics of how to record the adjustments in Quickbooks. Using the amounts given in my original post, what accounts should I debit and credit?

I guess adj journal entries be;
Advisor’s exp $143.44
A/P $143.44

If you pay, then

A/P $143.44
Cash $143.44

Intreset/Dividend fee $.92
Interest/Dividend Rev $.92
Other assets like Marketable securities are generally increased or decreased to match market value, in which case the offsetting entry is made to an equity account called something like "Unrealized Appreciation of Investments". There would also be an entry for the deferred taxes on the increase/decrease.If yu are a securities dealer, then, you need to apply mark-to-market accounting to reflect market valuation of available-for-sale securities. Securities that are not classified as either trading or held to maturity are classified as available for sale. These investments are reported at fair value, with any unrealized gains or losses bypassing the income statement and instead being reported in a special area of stockholders' equity. For example, if available-for-sale securities decline in value, credit the available-for-sale securities account and debit stockholders' equity.
available-for-sale securities $XXX
stockholders' equity $XXX


You may contact the software vendor for more info.

Thank you so much for the suggested accounting entries. Big help!

I had thought about using an equity account to capture offsetting entries for the mark-to-market adjusting entries. That way it keeps gains and losses from impacting the bottom-line while still allowing it to flow-through to me via Form 8949/Sch D/Sch K. Is that correct?

I guess so. If you're a trader, you may choose whether or not to make the mark-to-market election. You don't automatically get mark-to-market treatment when you file as a trader. And you can't elect this treatment if you aren't a trader. The most obvious consequence of the election is that at the end of each year you must mark your securities to market. What this means is you treat any stocks you hold at the end of the day on December 31 as if you sold them on that day for the current market value. If the stock has gone down, you get to report a loss without actually selling it. If the stock has gone up, you have to report that gain. Your basis for the stock is adjusted to reflect the gain or loss you report, so that you don't report the same gain or loss again when you actually sell the stock.Publicly listed firms use mark-to-market accounting to determine the value of a firm's net worth and the shareholder's equity. Publicly listed companies own assets such as real estate and vehicles that can fluctuate in value over time. Other income-generating assets, such as sales contracts, are even more prone to price fluctuation as one missed vendor payment could cause the value of a particular contract to plummet. Mark-to-market accounting involves determining the net worth of a firm by deducting its liabilities from the current market value of its assets. To reflect changes in the value of a firm's assets, the company accountants have to constantly revise the firm's net worth and this causes the value of a firm's share to fluctuate more than it would if the firm used a different kind of accounting method to determine the value of its assets.

I'm trying to get a handle on whether I have unrealized or realized gains/losses. The investment account is a managed account in which the advisor is buying and selling on a regular basis. Because of this, there are gains/losses generated for which a 1099-B was issued and which will have to accounted for tax-wise on Form 8949 and Schedule D. (This is probably also what's confusing me.) But have I truly realized any gains/losses? None of them have hit my cash account--all of the gains/losses have stayed inside the investment account. That being the case, am I dealing with unrealized gains/losses that should be accounted for in Quickbooks using an equity account for entries offsetting the asset account or realized gains/losses that should be accounted for using income/expense accounts?

Realized gains and unrealized gains or losses are two different classifications of capital gain. Capital gain is the income that you make on assets,i.e., stocks, bonds, different kinds of properties, and precious metals that you sell for more than the amount for which you purchsed them. The first thing that you need to know is that you have to pay income tax on your realized gains, but you do not have to pay income tax on unrealized gains.So, first of all, let’s talk about realized gains. The realized gains is the capital gain that you make on an investment that you receive in the form of cash. So, the investment can actually be when you sell a security, when you receive interest or dividends on a security or cash accounts that is sent to you as cash. If you are looking for where you can find realized gains, there are a few places where you can find them. You can look on the Distribution of Earnings Statement, the Income and Expense Statement, the Withdrawal Earnings Report, and the Balance Sheet. They will not be listed as “Realized Gains.” Instead, you will find them reported under the names of Taxable Interest, Miscellaneous Income, Dividends, Capital Gains, and so on.
Second, the basic definition of unrealized gains is that unrealized gains are the capital gain on an investment for which you do not receive cash. Unrealized gains are also defined to as referred to as paper profits. So, the unrealized gain is the amount that your stock’s value increases, but you have not sold the stock and you haven’t received the cash, so the gain is still unrealized. Or, in other ways, the gain is not yet translated into something physical, like cash. It is still a potential gain, and as soon as you sell the stock, then the gain will become realized when you receive your cash.The opposite of realized gain is realized loss. Realized loss is any loss that you have when you sell a stock. So if you sell a stock at a lower price than you bought it for, then it is a realized gain. Another way to talk about unrealized gain and unrealized loss is that the unrealized gain/loss is the difference between the current market value of a stock or investment and the book value of that investment.So why is it important for you to know the difference between realized gains and unrealized gains, and/or losses? You do need to know what you are going to be taxed on when it is time for you to turn in your income tax forms. You will have to pay taxes on your realized gains, but you will pay those taxes at a different rate than the regular income tax. There is a particular capital gains income tax rate. So, keep track of all of your realized gains even if it is just the $4 per share that you make on your annual dividends. You will have to pay capital gains tax on that dividend. Similarly, when figuring in how much return you will make on a stock when you sell it, don’t go and buy that boat before you figure in how much you are going to have to pay in capital gains income tax on that realized gain.