Originally Posted by kenwx23
#1;I received a final K-1 from a partnership back in 2009 with a positive ending capital account. I reported the income and other data from this K-1 but did not report it as a final K-1 and thus I never wrote off the balance of my capital account.
#2;Is it too late to do anything about this now?
#1; A partnership can maintain a single partnership capital account for all partners, with a supporting schedule that breaks down the capital account for each partner. However, it is easier to instead maintain separate capital accounts within the accounting system for each partner; Capital accounts are simply tracked in the bookkeeping records of the P/S. A partner’s capital account is substantially different from his outside basis in the partnership interest.When you reconcile an account, you are proving that the transactions that total to the ending account balance for an account are correct. This means you can prove that the transactions included in an asset, liability, or equity account are valid, and so should not be flushed out of the balance sheet by shifting the transactions into accounts associated with the income statement.
#2;You can adust them at any time. However, this sch M2 need not be completed if neither Sch L nor Sch M-1 is required. If the P/S is a small domestic partnership with income of less than $250K, and assets under $600K, filing sch A of 1065 is optional. Anyway, It's a good idea to adjust them. However, as a practice you can fill out these schedules not on the copy that will be sent to the IRS. That way you will have a starting point when it is needed without telling the IRS more than they require.