There are two methods available for handling the accounting in the equity section of a set of accounts for a partnership. These options have implications for how you generate financial reports from the LodgeiT Reporting module.
Option A - Reflect only the closing balance of the partner - (watch the video)
Pros -
- Simple to handle in accounting software
- Less line items mean less confusion for novice users
Cons -
- More tedious in the LodgeiT Financial Reporting module
- Won't support automated post-back method
Option B - Reflect all sub-accounts of the partners, including share of profit, capital introduced and drawings - (watch the video)
Pros -
- No need to make any manually value entries in LodgeiT
- Provides granular account detail i.e. profit reflects in a profit account
- Supports automated postback (coming to LodgeiT soon).
Cons -
- More tedious in the accounting software (unless there is auto-postback functionality from LodgeiT)
- Requires adjusting entries to move prior year balances to an opening balance account for each partner