Why is profit distribution being taken from Capital Accounts rather than Retained Earnings.
In my case, there is a business in which I am the 60% shareholder and numerous others owning the remaining 40%.
The funds contributed were a one time thing in the past and not there is no further investment from any shareholder. The business simply provides a percentage of the profit (in the event there is any) to each shareholder in proportion to their stake.
If I keep providing the profit from the Capital Account, it will keep reducing it and go into negative.
Is it me who is understanding it wrong or should it distribute the money from retained earnings?