Profit Appropriation work around
Problem reported by Jenny Carr 10 years ago
I know now that the historic retained earnings can not be accessed to move profit to capital or partner current accounts etc. I have trialled a work around by setting up an equity account 'appropriation of retained earnings.' And used this to record the movement of profit etc to the partners current account. I have checked the BS and this worked. The created account is effectively a double entry to the retained earning account to allow the movement of funds without affecting P&l or BS figures. Does this seem like the right work around??
I am currently completing my final exam using CB and probably won't have this issue in 'the real world' but need a work around for the exam. If anyone has encountered this & has a better solution or if I am not allowed to do it this way I would be really grateful for any advice
Thanks! Jenny