FAQ : Unappropriated Profit & Loss  no posting allowed

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When you try to post any GL journal entries into the unappropriated profit & loss account (or retained earnings) , you will see this warning message below.



Answer : The unappropriated profit and loss account (found in the Balance Sheet) is a special account that is a calculated net amount in the final profit and loss for the year end.
This figure is transferred from the Profit and loss account when you do a year-end closing.
Explanatory notes :
Look at the equation below


 A - B- C - D = E


You want to add another expense to reduce E because of audit adjustment.


So you want to appear A- B- C -D = E - B1 = E1
where B;C;D; are your expenses and E is your profit/loss value after deducting from A revenue


We are now saying you had to add B1 to B because you had somehow under provide (for example) and now you need to set B1 into the equation


We are suggesting that you do the followings


A - (B + B1) - C- D = E1


The above will give you a better comparison of your expenses that last year your B is actually B + B1 as compared to the auditor method that B is still B but all adjustment expenses add against the retained earnings that is not true for management understanding of your B group expenses.
There are 2 illustrations below.

Illustration 1: Audit Fee expenses...Click here...

          FAQ : Based on audit adjustments provided by the auditor, the audit fee was under-provided (or not provided) and auditor pass an adjustment to increase the audit fee and accrued for the additional amount.

Unappropriated profit and loss accounts, or retained earnings, was debited and accrued expenses was credited for under- provision of audit fee
             Dr    Retained Earnings (Unappropriated Profit/ Loss)           2,000.00
             Cr              Accrued Expenses                                                             2,000.00
              (Being audit fee under provided, now adjust back)
but the entry was not accepted by the system?


1. If entries are debited or credited in this account (in the balance sheet) , it will not be tally with the profit and loss of the year to date figure,
  since it is the year to date figure of the net profit / loss that is to be transferred to this account in the year end process, so it must be consistent to the Profit and Loss year end statement


2. For yearly comparison purpose, the audit fee will be hidden into the unappropriated profit and loss account and you will not see the actual value of the audit fee of the year.
   (For illustration purpose, a single expense entry is used to explain why system do not allow posting into the unappropriated profit and loss account.Assuming you had not provided for the audit
   fee and now auditor put through the accrued expense and charge the entry into the unappropriated profit and loss account instead of the audit fee expense account. The yearly comparison will
   show this particular year to be zero audit fee because it is adjusted in the balance sheet, unaudited profit and loss account, that will give a misleading information.


Illustration 2: Dividend under or not provided

        Another example : Dividend



3. Your account, Director dividend should not hit the Equity account. ie Classification I00...Read more...

Director Dividend should appear in the year that the dividend is declared, as in that year's profit and loss accounts.


If you "parked" it at the Equity account (balance sheet item) , don't forget, the Unappropriated Profit and Loss account is a year on year cumulative figure and your director dividend.
If you are correct, will be a "lost child" where there is no indication of which year the dividend is declared?
As you can see the dividend you post in 2014 Balance Sheet is supposedly for year 2013 accounts and you are presenting it wrongly in that year.

Your initial Dividend account should be :


1. Dr        Dividend declared ( Profit & Loss item  , expense)                        100,000

        Cr   Provision for Dividend ( Current liabilities , Balance Sheet)                                100,000

   (Being provision for dividend in 2013)


When actual payout in May 2014


2. Dr        Provision for Dividend  (Current liabilities , Balance Sheet)           100,000

      Cr     Bank                                                                                                                     100,000

    (Being withdrawal of dividend )



Please adjust the accounts accordingly, otherwise the retained earning accounts (under  I00)  will not add up and c/f to 2015. After that, delete away the accounts Directors' dividend.


If no provisions were made in 2013 and 2013 accounts is already closed, then you have to treat it as 2014 expenses in 1 Jan 2014 and paid in May 2014




See AR audit adjustments



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