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Liabilities – expense splitting

Occasionally, an invoice may be raised that includes multiple items or services, some of which should be allocated to different expense accounts, or to different member accounts.

For example, let’s assume our Fund engages a financial planner to revise the Fund’s income strategy. Most members agree to an investment strategy discussed among the Trustees, but Member One wants to hold segregated assets of a different type and with a different risk profile.  As part of his service, the financial planner arranges investments to Managed Funds for the Fund and for Member One, and entry fees apply for each investment.

The Adviser raises an invoice listing

  • Fee for Fund investment strategy:  $850
  • Fee for advice and strategy for Member One:  $250
  • Managed fund entry fee for the Fund’s investment   $120
  • Managed fund entry fee for the investment for Member One  $120

The appropriate journal entry would appear as:

When we view the entries in Accounting, we can see that the fees charged for services to the Fund appear in Fund accounts 5-1130 and 5-1120 and the Accounts Payable has increased by $1340, since the liability falls to the Fund.

 

The account for Member One shows expenses of $250 in Acct 5-1130 and $120 in Acct 5-1120. This member account’s balance will reduce by $370, while the balance of the invoice $970 will be divided among all other member accounts.