Introduction
As part of the year-end workflow, users may allocate profits for trusts. Once processed, system journals are posted automatically to account for the distribution including the various tax components attached, without the need for users to create these transactions.
The System Journals posted depend on the profit/loss scenarios. To locate the system journals, navigate to the Transaction List and enter keywords in the search bar. Ensure the System Journal filter is selected as per below:
To explain the system journals posted, an example of distributing profits for a beneficiary trust using the proportionate method has been used. However, the journals posted will be the same as those posted using the income streaming method, and when allocating profit for unit trusts, depending on the profit/loss scenarios.
To explain the system journals posted, we will use the following example:
A trust with two beneficiaries made a net profit last year, with $500 unallocated, held in Retained Earnings. In the current year, the trust made a profit of $3,000.
Therefore, the earnings available for distribution is $3500 ($3000 + $500).
In this example, the entire current year profit of $3000 will be distributed to the two beneficiaries
Once processed, system journals will be automatically created in the transaction list as at the end of the financial period.
Where profits are distributed solely from current-year profits, the following journals will be posted automatically based on the Distribution Percentage:
| Dr. 49450 Distributions Paid/Beneficiary Sub-Account |
| Cr. 58800 Unpaid Trust Distributions/Beneficiary Sub-Account |
Note: Where the current-year profit is fully distributed, no journals will be posted to the Retained Earnings account.
In this example, only $2000 of the current-year profit of $3000 will be distributed.
Once processed, system journals will be automatically created in the transaction list as at the end of the financial period.
Where profits are distributed solely from the current-year profits, the following journals will be posted automatically based on the Distribution Percentage:
|
Dr. 49450 Distributions Paid/Beneficiary Sub-Account |
|
Cr. 58800 Unpaid Trust Distributions/Beneficiary Sub-Account |
The system will also post the outstanding amount to the following journals, to carry forward any undistributed amounts to Retained Earnings.
|
Dr. 49000/Profit Allocation Account |
|
Cr. 58500 Retained Earnings |
In this example, the entire earnings available for distribution of $3500 will be allocated, which includes the current-year profit of $3000, and $500 held in Retained Earnings.
Once processed, system journals will be automatically created in the transaction list at the end of the financial period.
Where profits are distributed solely from the current-year profits, the following journals will be posted automatically based on the Distribution Percentage:
|
Dr. 49450 Distributions Paid/Beneficiary Sub-Account |
|
Cr. 58800 Unpaid Trust Distributions/Beneficiary Sub-Account |
The system will also post the below journals for the amounts that have been distributed from Retained Earnings as per the Distribution Percentage:
|
Dr. 58500 Retained Earnings |
|
Cr. 49000 Profit/Loss Allocation |
|
Dr. 49450 Distribution Paid/ Beneficiary Sub-Account |
|
Cr. 58800 Unpaid Trust Distributions/Beneficiary Sub-Account |
To explain the system journals posted, we will use the following example:
A trust with 2 beneficiaries made a net profit last year, with $500 unallocated, held in Retained Earnings. In the current year, the trust made a loss of $200.
Therefore, the earnings available for distribution is $300 ($500 - $200).
Enter the Distribution Percentage/Amount. Once processed, system journals will be automatically created in the transaction list as at the end of the financial period.
To account for the current-year loss, the following journals will be posted automatically:
|
Dr. 58500 Retained Earnings |
|
Cr. 49000 Profit/Loss Allocation |
The system will also post the below journals for the amounts that have been distributed from Retained Earnings based on the Distribution Percentage:
|
Dr. 58500 Retained Earnings |
|
Cr. 49000 Profit/Loss Allocation |
|
Dr. 49450 Distribution Paid/ Beneficiary Sub-Account |
|
Cr. 58800 Unpaid Trust Distributions/Beneficiary Sub-Account |
If the trust has made a current-year loss, that is greater than the retained earnings (if any). The Distribution Percentage/Amount field will be greyed out and displayed as $0, as there are no earnings available for distribution to the beneficiaries.
In this example, the trust made a current year loss of $600, leading to a net loss of $100 ($600-$500).
Users will be unable to enter the Distribution Percentage/Amount fields. Once processed, system journals will be automatically created in the transaction list as at the end of the financial period to account for the current year loss.
|
Dr. 58500 Retained Earnings |
|
Cr. 49000 Profit/Loss Allocation |
Tax Components - More Details Panel
The tax components entered from the Tax Components section will automatically populate the more details panel of the system journal 49450 - Distribution Paid/subaccount
Frequently Asked Questions
1. There are no beneficiaries in the Trust. What system journals will be processed?
In this case, the system will simply account for the current year profit/loss by posting to Retained Earnings:
|
Current Year Profit |
Current Year Loss |
|
Cr. 58500 Retained Earnings Dr. 49000 Profit/Loss Allocation |
Dr. 58500 Retained Earnings Cr. 49000 Profit/Loss Allocation |
2. How do I reprocess the locked system journals posted?
To update the distribution, return to the Distribute Profit tab in Period Compliance.
Users are able to update the distribution details on screen.
Once clicking
the system journals will be re-posted accordingly.
To remove all system journals posted from the Distribute Profit screen for the current financial year, select Reverse FY 20XX System Distributions on top of the screen
Alternatively, select Reverse Period from the Period Compliance screen to reset the selected financial year.
- Note: This will reverse any other changes entered in the Year-End process including reserve amounts entered in the Calculate Taxable Income screen.