Accumulated Adjustment Account - Explained
What is an Accumulated Adjustment Account?
Written by J. Mance Gordon
Updated at April 18th, 2024
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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.