Pool Accounting

To ensure full financial accuracy and enable proper reconciliation of your profit-sharing operations, our platform provides a complete accounting flow at the pool level. This guide details how to configure and use the pool-level accounting features for Suspense, Reserve, and Bank P&L accounts.

This process creates a complete audit trail, accurately tracking funds from the total pool income through to their final allocation after a profit application run.

Before you begin, ensure you have a comprehensive Chart of Accounts configured in Administration > General Setup.

Configuring pool accounting

To enable pool-level accounting, you must map the correct General Ledger (GL) accounts to your Profit Sharing Pool.

1. Navigate to Profit sharing > Product, select a Product, and navigate to Actions.
2. In the Actions screen, select View settings.
3. Navigate to Create product settings > Profit sharing GL Accounts section.
4. Choose a GL account from the drop-down list for each of the categories: Profit suspense account, Reserve account, Bank P&L account.
   • See below for definitions of these account types.

• Save the product.

• Suspense Account: This is a temporary holding account. When profit is applied, the total distributable profit for customers, reserves, and the bank is moved here before being allocated to the final destination accounts.
• Reserve Account: An account used to hold funds set aside after some procedure failure. After profit application of all accounts in the Pool, this GL account should be empty.
  Bank P&L Account: The final income account where the bank's share of the profit is recognized after all other allocations (customer profit, Mudarib share, reserves) have been made.

How pool-level accounting works

The accounting entries described below are automatically generated when an administrator runs the Apply Profit process for the pool. This process moves the funds from their source to their final destinations. The flow of funds follows two main stages:

• Stage 1: Moving Total Distributable Profit to Suspense
  • First, the system transfers the total profit amount that needs to be distributed from the pool's source of funds (e.g., an Income account) into the temporary Suspense account. This journal entry consolidates the distributable profit, preparing it for allocation.
  • Debit: Source of Funds GL (e.g., Pool Income)
  • Credit: Suspense Account
• Stage 2: Allocating Profit from the Suspense Account
  • Next, the system debits the Suspense account to allocate the funds to the various beneficiaries based on the profit distribution results. By the end of this process, the Suspense and Reserve Accounts balance for this transaction will be zero, and your financial reports will accurately reflect the final profit distribution.
  • Debit: Suspense Account (for the total amount)
  • Credit: Saving Controls (The total profit owed to all customers. This account is defined at the product level.)
  • Credit: Reserve Account (The amount allocated to reserves, if any.)
  • Credit: Bank P&L Account (The remaining profit belonging to the bank after customer shares and reserves are allocated.)