Hi what does it mean by distribution in the accounting equation. Does this include things like discounts or money given to shareholders.

Hi, starz13...

Very generally, "distribution" includes any unilateral transfer of value from a corporation to a shareholder; 'unilateral' in the sense that the distributee-shareholder doesn't give any value or consideration back in exchange.

"Money given to shareholders"--one that you specified-- is certainly the most common form of distribution, aka 'dividend'. But a distribution can be anything of value, including a discount on a sale of corporate property to a shareholder. For example, if a corp sells to a shareholder a piece of property for $8, when such property would have sold to any unrelated party at its fair value of $10, then the transaction is best viewed as two simultaneous components: (1) Shareholder pays $10 for the property; and (2) Corp gives two bucks back to shareholder as a dividend (distribution).

Thus, Corp should book the $8 "sale" as a $10 sale and a $2 dividend payout.

Just make sure that the recipient-shareholder didn't transfer anything of value to the corp in exchange for some or all of the purported dividend. If, say, the shareholder is also a working employee of the corporation, the 'distribution' might more properly be classified as compensation rather than as a dividend.

If by "accounting equation" you're referring to the classic identity
Assets = Debt + Equity
... then most shareholder distributions preserve the equality by reducing Assets and Equity by the same amount.

Hope this helps!

...it was early and I was full of no coffee...