Profit Sharing

1

Good day to you all,

Please i have a question.

Actually I’m not an accountant, i’m engineer and i started a small business in engineering field with my friends.

we are 3 owners, and i’m wondering how to make the manager software make the profit sharing automatically with a given percentage of each of us, example:

i should give the manager the such a below formula;

X should have 20% of the profit
Y should have 30% of the profit
Z should have 50 of the profit

then the manager show me the balance of each of us according to the above formula.

can this be possible ?

regards.

2

You really cannot do that. Each of you should have a capital account. Retained earnings are distributed to your capital accounts with a journal entry. Drawings are recorded by payments. The percentage allocation occurs in the journal entry.

Read all the Guides about capital accounts.

3

Thank you so much for your reply,

please i didn’t understand what you mean by the percentage allocation occurs in journal entry.

did you mean that there will be a percentage or i should the money amount which should be paid for each owner ?

4

can i make the automatic journal every month look at the profit and distribute it even with equity ?

5

I mean that the way you divide the total distribution of earnings in the journal entry should be according to your agreement on profit sharing. Using your earlier example, a distribution of 100 would be entered as:

Dr Retained earnings 100
Cr Capital accounts > X > Share of profit 20
Cr Capital accounts > Y > Share of profit 30
Cr Capital accounts > Z > Share of profit 50

No. You must determine the amount to be allocated to each partner. You can, however, do the calculation in the field. See https://www.manager.io/guides/18222.

No. But, if the distribution is the same every month, you could set up recurring journal entries for each partner.

1 Like
6

Thank you so much for your help and reply