Article Objective: To assist users in navigating Active Ledger & Reporting to easily distribute the net profit or loss of an entity. Context: Users are able to input a few details into the Distribution section of Active Ledger to generate an automatic journal which takes up the distribution of profit or loss for the year. Please refer to the Glossary for definitions of key terms used in this article. TABLE OF CONTENTS |
Making a distribution
Select the relevant dataset, navigate to the Other Info screen and click on the Distributions tab.
The following fields are required to be filled out to post the distribution:
| Field | Detail | Validation |
|---|---|---|
| Override Amount (checkbox) | The net profit pulls automatically from the current year earnings in the selected dataset, however if this is not the amount you are wanting to distribute for whatever reason, select the 'Override Amount' checkbox. This will enable manual entry for the distribution amount. | Optional |
| Adjustment | Type any adjustments required against the net profit in this box. | Optional |
| Copy From another Dataset | If you wish to replicate the distribution from a previous dataset within that clients file, select the relevant dataset. This will exactly replicate either the balance figures or percentages you input for that distribution. | Optional |
| Memo | This is for journal narration and is for internal use only. | Optional |
| Dividend/Distribution Account and Payable/Liability Account | This is where you input the accounts you are wanting to make the distribution to. See 'List of sample accounts' below for some ideas of accounts to distribute to. Note: As with all other journals, if your accounts don't exist, you can create them when making the distribution however, ensure you allocate the accounts after processing the journal. | Required |
| Balance and/or Percent | Distributions can be entered as fixed dollars (i.e. balance) and/or as percentages. Note: If you input percentages, it will not show the balance figures, and visa-versa. | Required |
| Losses (checkbox) | Select this checkbox if you are distributing a net loss instead of a net profit. This is only applicable to partnerships and sole traders. Note: You should not distribute partnership losses as dollars, only percentages. The dollars option is designed to pay a partner's salary or where someone is always entitled to a fixed dollar amount. | Optional |
List of sample accounts:
| Dividend/distribution account | Payable/liability account |
| Company | |
| Dividend Paid | Provision for Dividend |
Trust | |
| Distribution of Profit Beneficiary 1 | Share of Profit Beneficiary 1 |
| Distribution of Profit Beneficiary 2 (etc) | Share of Profit Beneficiary 2 (etc) |
Partnership | |
| Distribution of Profit/Loss Partner 1 | Share of Profit/Loss Partner 1 |
| Distribution of Profit/Loss Partner 2 (etc) | Share of Profit/Loss Partner 2 (etc) |
| Partners Salary | |
Sole trader | |
| Distribution of Profit | Share of Profit/Loss |
Once the above sections are filled out accordingly, select Post Automatic Journal. A notification will pop up on the screen when it has processed successfully.
The journal will now appear in the Journals screen and can be edited or deleted like other journals.
Note: To show the profit/loss split in the appropriation statement, you will need to create separate dividend/distribution accounts for each shareholder/beneficiary/partner (as shown in the 'List of sample accounts').
You can then wrap up the headers in the balance sheet to consolidate them if required.
Refreshing distribution journal
Should you need to make any adjustments to your file, or need to refresh the client's data, press the Post Automatic Journal button again on the Distributions page and it will update the existing journal with the new figures.
Alternatively, you can click on the Process Automatic Journals button in the Journals tab to post any distribution configurations saved (along with depreciation and primary production journals).
Rolling over balances in the next year
Active Ledger allows certain accounts to be tagged as 'Opening Balance' accounts so that any account balances sitting under the same header will be moved to those accounts designated as opening balance accounts in subsequent years. This is particularly useful for beneficiary/partner accounts.
Setting up the accounts
To ensure that the balances are rolled into the correct accounts in subsequent years, make sure that your accounts are set up correctly in the chart of accounts.
The example below shows a typical set up for a beneficiary - this process would have to be done for all beneficiaries.
For more information on how to set up accounts, see the knowledge article: Accounts - overview.
Opening balance accounts also needs to be tagged as an official 'Opening Balance Account'. To do this, edit the account by clicking on the pencil icon.
Tick the Opening Balance Account checkbox. This tells Active Ledger to move the balances of the drawings and share of profit accounts to this account when creating next year's dataset.
Rolling over balances
To move the prior year closing balances to opening balance accounts as described above, you will need to select the checkbox for Roll over opening balances when setting up a new dataset. This will bring up a dropdown menu of the available datasets. Select the relevant one (generally the prior year).
For more information on creating a dataset, see the knowledge article: Dataset - Overview.
An example is shown below of the resulting balance sheet after creating the new dataset.
