Tasks - AccountEdge – CPA Adjusting Entries (U.S.& Quebec)

It is very important that the MCA understands the entries the CPA is providing the market center.  Be sure to verify that the account numbers the CPA is using are the correct KW Chart of Accounts (U.S. and Canada) numbers, as those might have changed.
 
Book the CPA entries in the current year (for example: 2011 adjustments will be booked in 2012).

1. Entries to any Balance sheet accounts are booked exactly as the CPA entry is provided.
2. Entries to any expense accounts will instead be booked to Retained Earnings on the Market Centers books.
3. Items that are booked to Retained Earnings are those expenses that were not accounted for above the line before profit sharing in the prior year, so adjustments to the KW Cost Adj – Prior Years and Rvs Cost Adj – Prior Years accounts will need to be added to the journal entry.

 
Example of CPA entry and MC entry:

 
This will ensure that the market center owners do not pay profit share prior to the allowable above the line expenses being booked.
 
This entry does not affect the net profit for the current year tax return.  The CPA will see that the prior period cost adjustments were accounted for on the prior year Owner’s tax return.
 
The CPA will typically want to include the Owner Distributions/Dividends into the Retained Earnings account. This is not allowed per the KW Economic model. It is allowable for the owner’s tax books to be different from the market center’s transmitted books. 
 
The CPA will simply add the 3 line items together to come to the balance they show on the tax returns.
 
KW financials should always reflect from inception of the market center the following accounts:

• Owner Distributions/Dividends
• Paid in Capital
• Retained Earnings

 
Final Step:
 
If you have entries hitting expenses above the line (i.e., “KW cost Adjustment – Prior Years”), submit a Budget Variance Request to your Regional Director for approval to enter the additional expense or income via a KW Cost Adjustment journal entry. When the Regional Director approves this variance, enter the KW Cost Adjustment JE to record the change as stated in 1c. This KW Cost Adjustment JE must be booked in your current transmittal month.
 
If the dollar effect to the market center financials in the month that you received the entries from the CPA is large, it is allowed to spread these cost adjustment expenses over the remainder of the year.  It is mandatory that all cost adjustments be expensed by the end of the current year.
 
Please contact MCASupport@kw.com if you have any questions.