Legal Dictionary of Pakistan

accumulated-aaUustments account

Tax. An item on the books of an S corporation (usu. an equity item on the corporation's balance sheet) to account for taxable-income items passed through to shareholders, such as accumulated earnings - earned before the corporation converted from a C corporation to an S corporation - that would have been distributed as a dividend to the shareholders if the corporation had remained a C corporation. 0 One of the theories underlying the accumulated-adjustments account is that the shareholders should not be permitted to avoid dividend-tax treatment on a corporation's accumulated earnings just because the corporation converts from C status to S status. IRC (26 USCA) § 1368(e)(1). -Abbr. AAA.