There are several ways for a Market Center to account for E&O. Confirm with your OP how your particular Market Center handles E&O. The following steps illustrate how to account for E&O monthly when your Market Center collects E&O per transaction as part of the DA. Per KW Policies and Guidelines, the excess E&O funds must be kept in a separate bank account.
Note: If your Market Center charges a flat E&O expense through AccountEdge, the Agent Invoice should be set to have these fees automatically booked to the “KWR Excess E&O Reserve/Payable” account. Skip to step 5.
Using the Closed Sales Volume Report, highlight the amount of E&O collected through the DAs for the month.
In AccountEdge, click Accounts. Click Record Journal Entry.
Using the last day of the month in which you are transmitting, book the following journal entry using the amount listed on your Closed Sales Volume Report.
- Debit the account “E&O Collected from Agents.”
- Credit the account “KWR Excess E&O Reserve/Payable” up to 10% of MC's average sales price or 25% of next year’s E&O Premium.
- Credit the account “Special Events Payable” for the excess above 10% of MC's average sales price or 25% of next year’s E&O Premium.
The balance for the account “KWR Excess E&O Reserve/Payable” should never exceed the IALC Profit Sharing Accounting Guidelines allowance without Regional Director and KWRI approval. If the account reaches the allowed balance, the excess can be placed in a Special Events account. For more information, refer to the Profit Share Accounting Policies and Guidelines in the Policies & Guidelines Manual found on KWConnect.
The funds that make up your KWR Excess E&O Reserve/Payable need to be transferred to the KWR Excess E&O Cash account. Create a journal entry using the Transfer Money to move the money from where it has been deposited to the Excess E&O Cash account.
NOTE: After creating the journal entry, don't forget to make the actual transfer with your bank.