Where to Enter Partner Capital in UltraTax CS
Partner capital is entered in the Analysis of Partners Capital Accounts section of Screen M1M2, in the Balance Sheet folder, and the capital account method is set in Screen K1Misc. Schedule M-2 and item L of every K-1 are built from those entries, which is why the IRS expectation that M-2 equals the total of all partners item L amounts holds automatically.
- Set the capital account method
- Enter beginning capital
- Let M-2 and item L compute
- Check the allocations
- Only force when the basis differs
- Balance Sheet folder
- Screen M1M2
- Analysis of Partners' Capital Accounts
| Trial balance account | UltraTax CS screen and field | Lands on |
|---|---|---|
| Partner beginning capital | Screen M1M2, Capital account, beginning of year | Schedule M-2 line 1 and K-1 item L |
| Capital account method | Screen K1Misc | Drives the basis shown in item L |
| Net income per books | Screen M1M2, Net income per books (Force) | Schedule M-2 line 3 |
| Partners capital on the balance sheet | Screen L, Partners' capital accounts (Force), only if book basis | Schedule L line 21 |
| Partner draws | Screen M1M2 withdrawals and distributions | Schedule K line 19a and K-1 item L |
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Try it freeWhere to Enter Partner Capital in UltraTax CS on a trial balance
| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 42,800.00 | |
| 1200 | Accounts receivable | 68,500.00 | |
| 1300 | Inventory | 55,000.00 | |
| 1500 | Equipment | 145,000.00 | |
| 1510 | Accumulated depreciation | 47,500.00 | |
| 2000 | Accounts payable | 28,400.00 | |
| 2100 | Accrued expenses | 9,200.00 | |
| 2400 | Notes payable | 92,000.00 | |
| 2450 | Due to shareholder (the account this page is about) | 15,000.00 | |
| 3000 | Common stock | 10,000.00 | |
| 3900 | Retained earnings | 86,300.00 | |
| 3950 | Shareholder distributions | 52,000.00 | |
| 4000 | Gross receipts | 612,000.00 | |
| 5000 | Cost of goods sold | 318,000.00 | |
| 6000 | Salaries and wages | 88,000.00 | |
| 6050 | Officer compensation | 72,000.00 | |
| 6300 | Depreciation expense | 21,500.00 | |
| 6900 | Other operating expenses | 37,600.00 | |
| Total | 900,400.00 | 900,400.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Income summary | 74,900.00 | |
| Partner A capital | 37,450.00 | |
| Partner B capital | 37,450.00 |
| Account | Debit | Credit |
|---|---|---|
| Partner A capital | 26,000.00 | |
| Partner A draws | 26,000.00 |
One screen drives both reports
Screen M1M2 in the Balance Sheet folder holds the Analysis of Partners' Capital Accounts, and both Schedule M-2 and item L of each K-1 come from it. That is deliberate: the IRS position is that a partnership's Schedule M-2 should equal the total of the amounts reported in item L for all partners, and building both from one place makes that true without reconciliation.
The capital account method is set separately, in Screen K1Misc, and the amounts on M1M2 follow it. Check that first when the figures are not in the basis you expect.
Book basis on M-1, tax basis on M-2 and the K-1
This catches people. Schedule M-1 uses book basis, while Schedules M-2 and the K-1 now use tax basis. So M-1 and M-2 are not two views of the same number, and they are not supposed to agree.
If the calculated M-2 line 3 is wrong, the field to use is Net income per books (Force), in the Analysis of Partners' Schedule M-2 Tax Capital Accounts section of M1M2.
When Schedule L has to differ
A partnership whose balance sheet is maintained on a book or GAAP basis will have Schedule L capital that differs from the tax basis M-2 figure. Screen L has a Partners' capital accounts (Force) field, plus a reconciliation statement, for exactly that case.
Equally important: when the two should agree, verify that nothing is sitting in those force fields. A force left over from a prior year is a common reason the balance sheet and M-2 disagree with no obvious cause.
Allocations need totals too
If a field has allocations to partners entered through the Ptr Alloc button, it also needs a total entered directly in the field. Missing that is the documented reason M-2 lines 3, 4 and 7 fail to match item L of the K-1s.
A short year or final return
Beginning capital on the new file is the ending capital from the prior one: enter it in Capital account, beginning of year on Screen M1M2 and allocate it to the partners. Nothing carries it across for you when the prior period was a separate filing.
Tax return treatment
| Form | Line |
|---|---|
| Form 1065 | Schedule L line 21, Schedule M-2, and item L of each Schedule K-1 |
Common questions
Where is partner capital entered in UltraTax CS?
In the Analysis of Partners Capital Accounts section of Screen M1M2, in the Balance Sheet folder. The capital account method is set in Screen K1Misc, and both Schedule M-2 and item L of each K-1 are built from the M1M2 entries.
Why do Schedule M-2 lines 3, 4 and 7 not match item L of the K-1s?
Usually because a field has partner allocations entered through the Ptr Alloc button without a total entered directly in the field itself. Check each allocated field for a total before looking anywhere else.
How do I fix a wrong Schedule M-2 line 3?
Use the Net income per books (Force) field in the Analysis of Partners Schedule M-2 Tax Capital Accounts section of Screen M1M2. Remember that M-1 is book basis while M-2 and the K-1 are tax basis, so the two are not meant to agree.
Why does Schedule L capital differ from Schedule M-2?
Either legitimately, because the balance sheet is kept on a book or GAAP basis while M-2 is tax basis, in which case Screen L has a Partners capital accounts (Force) field and a reconciliation statement, or because a force field was left populated from a prior year.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 17, 2026.