Setup for Carried Interest Journals Related to Costs

The accounting of carried interest journals for costs requires the following accounts:

• Carried interest accounts

  Cost amounts from carried interest journals are entered as a debit to these accounts. These accounts are the accounts used by the managing partner to account for the costs being carried for nonconsenting stakeholders.

• Cutback accounts

  Cost amounts from carried interest journals are entered as a credit to cutback accounts for the joint venture. Capturing these amounts in cutback accounts enables a managing partner of a joint venture to report on its actual costs excluding costs being carried for nonconsenting stakeholders.

• Accounts for overhead charges

  For overhead charge amounts, instead of a cutback account, you need to account the carried amount against either a cost recovery or revenue account. This depends on how you’ve set up overhead accounts on either receivables invoices or internal transfer journals.