An investor is a person or entity who has a percentage ownership of a partnership, generally a propertycompany. An investor is associated with an AP Vendor to allow for invoices to be created to handle the distribution. The Partnership Accounting feature associates an investor with a specific general ledger account for a specific partnership, allowing for distribution of a portion of the overall retained earnings to their specific account.

A partnership is a legal form of business operation between two or more individuals who share management and profits. Partnerships are what investors invest in.

A partnership is assigned to a General Ledger Entity (Standard Setup)/Company (Simplified Company Setup), Accounts Payable Property/Company and Bank account. This allows for defining the cash account, contributions account, equity account and distribution expense code.

A Simple Partnership forces 100% investments, with only one Owner Contribution transaction allowed. Refer to Global Policies Setup - Partnership Accounting Tab for more information.

Ownership percentage is separate from the transaction amounts (equity, contributions, and distributions). Transaction amounts affect the G/L accounts; Ownership Percentage is used in calculating distributions.

There is no tieback from the General Ledger to Partnership Accounting. Any edits made to the G/L Transactions are not reflected back to the Partnership Accounting transaction.

A high volume of manual transactions entered would be unexpected. In general, users will create a single transaction when the partnership is established, which defines the percentage for each investor, and that the percentages seldom change after that.

Policies control some functionality. Refer to Partnership Accounting in Setup Global Policies Tabs for more information.

Partnership Accounting Menu

The ability to work with partnership accounting functions is located in the Partnership Accounting menu in eFinancials.

Reports

The reports for Partnership Accounting are part of the eFinancials Reports menu, under Partnership Reports:

• Investor List
• Partnership List
• Transaction History
• Select Investors or Partnerships - This topic provides help with report selection criteria.

Investors, Partnerships, and Partnership Links can be set up at any time because they do not affect the general setup process for eFinancials.

Setup Prerequisites and Dependencies

These setup requirements and dependencies exist for the Partnership Accounting feature.

Setup for Partnership Accounting

• The Investor must already be set up and available for selection as a Vendor before Investor setup can be done. Refer to the Setup Vendors Grid for more information.
• Investors should be set up before Partnerships are set up, and both should be set up before Investor/Partnership Links are set up. These setup options are found under Setup—Partnership Setup.

Dependencies for Partnership Accounting

Partnership Accounting menu items have these dependencies.

• Transaction Entry is dependent on Investors and Partnership Links being set up.
• Transfer to GL is dependent on transactions and uses the Entity ID (Standard Setup)/Company ID (Simplified Setup), Cash Account, Equity Account, Contribution Account from the Partnership setup.
• Create AP Invoices is dependent on transactions and uses the Property ID (Standard Setup)/Company ID (Company Setup), Bank Account, and Distribution Expense Code from Partnership setup.
• Distribute Retained Earnings is dependent on transactions and uses the  Retained Earnings Account from the Investor/Partnership Links setup and the Retained Earnings account from the Entity/Company setup for the Entity/Company that the Partnership is linked to.

Calculations for PA: Create AP Invoices and PA: Distribute Retained Earnings are based on the percentage, as defined via Owner Contribution (OC) transactions, and prorated for the time period the Investor has had that percentage using actual days.

NOTE that the percentage is exactly what is entered in via the OC transaction, so you can have a situation where a partnership is under (or over) 100% allocated to investors.

In the case of Simple Partnerships, however, the percentage will always be 100% and therefore the entire amount will be distributed.

Example

Complex example (most partnerships will not be like this):

Investor 1

OC on 1/1/2014 for 40%

OC on 3/1/2014 for 5%

OC on 6/1/2014 for 10%

OC on 9/15/2014 for -8% (reducing percentage)

Investor 2

OC on 4/1/2014 for 10%

OC on 8/2/2014 for 5%

Distribution of $1000 from 1/1/2014 through 12/31/2014.

Calculated distributions are:

Investor 1

From 1/1 to 2/28 @t 40% = 1000 * 59/365 * .4 = 64.66

From 3/1 to 5/31 @ 45% = 1000 * 92/365 * .45 = 113.42

From 6/1 to 9/14 @ 55% = 1000 * 106/365 * .55 = 159.73

From 9/15 to 12/31 @ 47% = 1000 * 108/365 * .57 = 139.07

Investor 2

From 4/1 through 8/1 @ 10% = 1000 * 123/365 * .10 = 33.70

From 8/2 through 12/31 @ 15% = 1000 * 152 / 365 * .15 = 62.47

So in this example, there will be 2 invoices created, one for Investor 1 with 4 lines and one for Investor 2 with 2 lines.