You are setting up a partnership return, you have the prior-year balance sheet in front of you, and you get to Schedule M-2 — Analysis of Partners' Capital Accounts. The beginning balance needs to go in. You click the field.
Drake will not let you type in it.
This is not a bug, and the workaround is not obvious from the screen you are looking at.
Schedule M-2's beginning balance is a total, not an input
Drake computes the Schedule M-2 beginning capital by adding up the beginning capital accounts of the individual partners. It is a summary field, so it is not editable — the same way you cannot type over a subtotal in a spreadsheet formula.
The entry happens one level down, on each partner's K-1 screen.
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Open the K-1 partner screens and each partner has their own beginning capital account field. Enter each partner's figure there, and Schedule M-2 populates itself with the sum. If you have four partners, you make four entries and the M-2 line appears.
The same principle governs most of the partnership equity section: the partner-level data is the input, and the partnership-level schedules are derived from it. It is worth internalizing, because it explains several other fields that look editable and are not.
The copy trap that will cost you an afternoon
Here is where this genuinely goes wrong, and it is easy to do while moving quickly.
Each partner's prior-year K-1 shows Item L with both a beginning and an ending capital account. The number you need is the ending balance — that becomes this year's beginning.
Grabbing the beginning column instead is a natural mistake, because you are entering something called "beginning capital" and your eye lands on the column labeled beginning. The return then will not reconcile, and the difference is exactly one year of that partner's activity, which is not a number you will recognize.
Do the same for the total on Schedule L: last year's ending partners' capital is this year's beginning. When it ties, the equity section is built on a correct foundation and everything downstream has a chance of working.
While you are in the partner screens
Entering beginning capital is one of several things that has to happen per partner, and they are all in the same place:
- Name, address and taxpayer identification number
- Type of partner — individual, corporation, partnership, estate, trust — which affects K-1 checkboxes and can trigger other filing requirements
- General partner or member-manager versus limited partner, which drives whether the partner's distributive share is treated as self-employment earnings
- Profit and loss sharing percentages, beginning and ending
- Capital percentage, beginning and ending
Profit/loss percentage and capital percentage are frequently different numbers. A partner can hold 63% of profit and loss and 79% of capital. Copying one into the other is another quiet way to produce K-1s that do not reconcile.
Those percentages have a second job: any partner owning 50% or more of profit, loss, or capital triggers Schedule B-1, which has to be completed separately with the owning party's name, EIN, entity type, country of organization and percentage. The Schedule B questions about entities and individuals owning 50% or more are what flag it, and the percentages you enter on the partner screens are what make those answers true.
Two Drake quirks worth knowing before they waste time
No commas in numeric fields. Typing a number with thousands separators is rejected. It is a small thing that interrupts you repeatedly during a data entry session — enter figures as plain digits.
Retained earnings and partners' capital on Schedule L are computed, not typed. Once the income statement and the partner capital data are in, Drake calculates the ending equity. If the number it produces is not what you expect, the fix is upstream — an income item, a distribution, or a beginning balance — not the balance sheet field.
Why the beginning balances deserve more care than they get
Beginning capital is the single most consequential number in the partnership equity section, because everything after it is a roll: beginning capital, plus contributions, plus the share of income, less distributions, equals ending capital.
Get the beginning wrong and the ending is wrong, and it stays wrong next year, when someone copies that ending balance forward as the following year's beginning. Nothing in e-file validation checks whether this year's beginning capital agrees with last year's ending capital. Only a person comparing two returns catches it.
That is the argument for verifying it deliberately rather than trusting a copy: each partner's beginning capital this year should equal that partner's ending capital on last year's K-1, and the partners' columns should sum to the M-2 beginning balance.
Where the numbers feeding all of this come from
Notice how much of the equity section is downstream of the trial balance. The income allocated into the capital roll comes from ordinary business income plus separately stated items. The distributions that reduce capital come from equity accounts in the client's books. If a distribution was miscoded as an expense, or a guaranteed payment was booked as a draw, the capital accounts inherit that error and no amount of careful data entry in Drake will fix it.
Ledger IQ addresses that upstream half. Distributions map to the capital accounts and never touch page 1. Guaranteed payments map to their own page 1 line, separate from distributions, so the two cannot blur together. Book-to-tax differences get recorded as tax journal entries with dedicated M-1 and M-2 offset rows, keeping the book numbers intact while the tax difference is tracked separately.
Prior-year balances can be entered or carried forward from a rolled-forward engagement, and the Return Tie-Out compares each line against the return as filed — so a beginning balance that disagrees with the prior year surfaces before the return goes out rather than a year later.
Supports Forms 1065, 1120-S and 1120, with exports for Drake, Lacerte and UltraTax CS. The Drake walkthrough is in the Drake Tax resource guide.