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When I roll the year will the amount in the drawings acct be cleared or is there something that I have to do to clear it?
Our business structure is a partnership 50/50 husband & wife. I have done a journal entry to distribute the profits for 2014. Drawings are posted to a single acct. during the year.
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Thank you for your enquiry @4Matt
If you are using AccountRight v2014.4 and later, you can set it up so AccountRight distribute the profit and loss automatically.
To do so you will need to create the required equity accounts for each partner, then allocate the accounts and percentage via Setup > Profit & Loss Distribution. Once the set up is complete, the Current Earnings accounts in the Account List window and reports will always show each person's share. When you close the financial year, those amounts will be transferred to each person's Retained Earnings account.
For detailed instructions please follow this Help Page: Distributing profit and loss. If you are using an older version of AccountRight, manual journal entries are required, please follow this support note for more information: Partnerships.
Hope this helps. Please feel free to post again at any time if you have more queries.
Thanks for the reply Clover. Apologies it has taken a while to get back to you.
I have followed your suggestion and set up the P&L distribution. (in Clearwater as a test.) I have also set up drawing accounts for both partners.
I have a couple more questions.
Q1 There are about 100 drawings transactions entered into the current drawing acct. Will I need to split each
one 50/50 or can I just do a single journal entry at EOY?
Q2 Will the drawings be cleared to retained earnings when the year is
Thank you for the update.
You can do an EOY journal, however we would suggest to redo the transactions so they reflect correctly in the accounts you have just set up.
During the rollover of the company file the drawings will be moved to the retained earnings account that you have set up for each person.
I hope this information helps.
I actually disagree with @KattC on this one. If the drawing account is not set to be an equity account the account balance will not reduce with when you roll the financial year. Generally its only your Profit and Loss accounts that will zero out - income, expense and cost of sales. The only exception to this rule is the Current year earnings account, while this is an Equity account it stores your net profit and loss for the current financial year so this will zero out as well.
It then becomes a question of should it refer back to zero? Well in my opinion is it shouldn't. For example if I was in a partnership I would want to see how much the other partner is taking from the business compared to me regardles of whether we have rolled the year. But I would recommend speaking to an accountant to clarify what their thoughts would be, however my understanding AccountRight shouldn't in theory do it by default and it would be a case of doing a journal entry in my opinion.