Recording director profit distribution payments
Hi
I am hoping someone can give me a bit of guidance. I am working for a pty ltd company that has 2 x directors with a 65 / 35 profit split. For a few years the company recorded a profit which each director paid tax on in their personal capacity but the company didn't have the cash flow to pay the profits to them at the time. The company's cash flow is now sufficient for them to each received regular payments for the profits made in previous years. They have already paid tax on these profits (confirmed by accountant) and there are a lot of funds to pay so the profit payments will remain based on past earnings and not on current.
I have tried to look through all the support notes and I am not sure if the best thing to do is create them each an Equity account with their opening balance under their own individual "retained earnings" and then record the payments against that or if I should do it another way.
I am also concerned that the existing "Retained earnings" account has a balance in it which does not match the accountants FYE figures (I took this file over from a former employee who did not enter anything correctly) and I am concerned added opening balances to new equity accounts will throw everything out. e.g. exisiting retained earnings is $ 250 000.00 (example only) and based on accountants FYE tax returns director A has $ 255 000.00 in previous profits and director B has $ 190 000.00 (again figures are examples only). I am trying to fix everything and get it all correct and for the most part we have, this is the final item and I am just unsure of how to do it without making a mess of it all.
Any help or advice would be greatly appreciated.
Thank you!