What is an Accumulated Adjustment Account?

The Accumulated Adjustments Account (AAA) is a balance sheet account that contains the net (post-tax) retained earnings of a corporation that is taxed under Subsection S of the Internal Revenue Code.

 Profits of the S Corporation pass through to the shareholders for taxation. If the actual funds are retained by the corporation, shareholders are still subject to taxation. These post-tax funds are retained in the Accumulated Adjustments Account.

The Accumulated Adjustments Account keeps these funds separate from the original contributed capital and non-taxable income of the corporation.