The Calculate Profit/Loss feature in Simple Invest is similar to Create Entries in Simple Fund 360.
For Companies, Profit/Loss allocation follows a similar Year-End Workflow as Distribute Profit for Trust. Upon making the adjustments in Calculating Taxable Income. The system will perform a profit/loss calculation automatically and allow users to directly allocate profit/loss to Retained Earnings.
Please also check articles on how to allocate profit/loss for Individuals.
|Navigate to Compliance from the Main toolbar|
|Select Period Compliance|
Select the Distribution Frequency. You can select between yearly, quarterly or monthly Profit/Distribtuion calculations. Alternatively, select Other to be able to specify your desired period.
Click Start Workflow for the selected Entry Period.
1. Follow the Workflow by selecting Calculate Taxable Income.
The Calculate Taxable Income screen will display, with relevant tax labels attached.
Users can make adjustments by selecting Add Item under Less, Add, or Tax Adjustments section.
Select to proceed to the next step.
Carried-Forward Franking Credits
Simple Invest 360 will automatically calculate the excess franking credits based on any franking credits and the franking credits tax offset for the current financial year.
The system will convert the excess franking credits to an equivalent tax loss which is carried forward to future years along with any other prior year losses.
Once the period is closed, the carried forward tax losses can be found via View Losses.
Note: BGL does not provide tax advice. Please refer to ATO for details
2. Calculate Profit/(Loss)
The system will perform a profit/loss calculation.
Users can select Allocate Profit to Retained Earnings, where a system allocation journal will be posted automatically; Users can also select Continue to process a manual allocation from the Transaction List later.
Users are not allowed to Close Period, without processing the profit/loss allocation, and the system will prompt with the below warnings. Users can click Distribute Accounting Profit from the warning message to process the allocation.
Profit/Loss Allocation Journals
Tax journals and Tax components for distributions will only be posted in the final segment of the Financial Year or when calculating Profit/Loss for the entire Financial Year.
a. Allocate to Retained Earnings
Dr: 49000 Profit/Loss Allocation
Cr: 58540 Retained Earnings
b. Distribute profits as dividends to shareholders
If the company declares dividends to shareholders, users can create a Dividend Payable Account or other equivalent account and post as below:
Dr: 49000 Profit/Loss Allocation
Cr: 85550 Dividend Payable (User created as in the example below)
Note: depending on the scenario (e.g. if dividend decisions are finalised), different journal entries can be created.
e.g. If users want to utilise 49550/sub-account to further reflect it in the operating statement, then the below journal may be created.
Once completed, select to finalise the transaction.
Post it to Retained Earnings Account
In year 1, the company incurred a net loss of $1,000.
Dr: 58540 Retained Earnings
Cr: 49000 Profit/Loss allocation
Note: a company can claim a deduction for the carried-forward losses in a year it chooses.
In the next year, the company made a net profit of $1,000. Assuming the ATO - Loss Deduction Rule is passed, the company decides to claim the previous loss of $1,000 carried forward to offset the income.
Under the Calculate Taxable Income tab, the system will display the Tax Losses brought forward available for offset, where users can update the amount.
Dr. 49000 Profit/Loss Allocation
Cr. 58540 Retained Earnings
In year 1, the company made a net operating profit of $1,000 (excluding capital loss) and incurred a net capital loss of $300. No dividends are declared. Similarly, the capital loss can not be offset against ordinary income and thus needs to be carried forward.
Dr. 49000 Profit/Loss Allocation $425 [$1,000 * (1- tax rate%) - $300]
Cr. 58540 Retained Earnings $425
In the next year, the company made a net capital gain of $300, and the previous capital loss will be automatically applied, which is recorded under Prior Year Losses - Carried Forward Capital Losses.
Manage the Profit/Distribution workflow by using the Timeline.
The Timeline will allow you to select the previous period in the Financial Year.
Selecting a previous period will allow you to Reverse Period if you ever need to reprocess the Profit/Distribution calculation. Simply click .