LLP automatic division of profits

Hello

 

This may be a very basic query, so apologies, but this is the first LLP set of accounts that I have prepared !

On line 32 of the P&L account, I have a loss before members remun etc of £5,000

Then, line 34 takes you to the notes page, line G54 - which I need - the automatic division of profit (or in this case a loss) - but it has a TB reference that I cant follow. I need to be able to split this loss on the face of the P&L, but cannot see how I do this ? I think I am becoming very confused, and Ill be honest some of the LLP terminology is very new to me!

 

Any pointers would be appreciated.

 

Many thanks,

 

Caren

Comments

 LLP losses    1 thanks

vtsoftware | | Permalink

I suspect there might be as many as four issues involved here:

  • How are profits allocated in an LLP?
  • What needs to be disclosed?
  • Should losses be treated differently to profits?
  • What entries are needed in the VT trial balance?

How are profits allocated in an LLP?

Automatic divisions of profit are shown as a deduction from profit under the heading Members’ remuneration at the bottom of the profit and loss statement (a bit like the way dividends used to be shown in companies). This contrasts with profits available for discretionary division which are credited to Other reserves.

What needs to be disclosed?

There is no requirement to disclose the split between members, although you could add this to the VT template.

Should losses be treated differently to profits?

The SORP is silent on this matter. It seems odd to show negative members remuneration. Also, do you really want to show losses as being recoverable from the members? The alternative is to debit Other reserves. I think this one is up to the members/accountant to decide depending on the circumstances.

What entries are needed in the VT trial balance?

The formulas on the face of the profit and loss account refer either directly to the TB, or indirectly to the TB via a note. You do not really need to follow them. If you get the TB right then the accounts will be correctly stated.

If you have an automatic division of profit, you need to make the following entries in the TB to credit the members and show the amount being deducted under Members remuneration on the face of the profit and loss account:

  • Debit P/L - Members remuneration: Automatic division of profits (last row in P/L section of TB)
  • Credit BS - Profits due to members: Members remuneration

Any remaining profit is in effect automatically credited to Other reserves by VT.

There is more on all of this in VT’s Accounting for LLPs – a brief guide.

Philip Hodgson
VT Software

LLP profits

levelheaded1903 | | Permalink

Many many thanks Philip - your answer has exactly answered all my queries - and as I say, I was starting to become a little confused with it, so have left it for a few hours, but can now see the light at the end of the tunnel ! Thanks again, 

Add comment
Log in or register to post comments
Group: VT Software discussion group
A place for sharing tips and ideas on VT Transactions and VT Accounts.