Divisions

Features

• Divisions are only enabled on those clients that need them.

• Once enabled they can be attached to funds in the investment ledger. If this is done then every entry to an investment in the fund is recorded against its division in the nominal ledger. So all the entries in a fund relate to one division, but multiple funds in the investment ledger can be set to post to a single division in the nominal ledger.

• Entries, other than investment or property ledger entries, can have the division recorded against them at the time of data entry. So all the lines of an entry relate to a single division. This means that a trial balance for a single division always balances.

• To do a transfer from one division to another it is necessary to post two entries going via a suspense account. For instance, to transfer from division 001 to division 002 on account 0001:

• Unlike sub-accounts, divisions do not need to be created for individual nominal accounts. Once created, a division can be used on a posting to any account. So divisions are a good way of analysing a trial balance where the same analysis is required on every account. Whereas sub-accounts can represent different things on different accounts.
• Also the use of a division on an entry or fund is optional. So it is possible to produce a trial balance for entries with no division.
• At the year end the analysis by division is preserved and an Opening Balance entry is produced for each division.
• In general, it is not possible to analyse trial balances for prior years by division. But there are some exceptions to this rule and prior year divisional trial balances are discussed in more detail below.

Uses

In many ways, beneficiaries can be represented better using divisions than by other methods:

• Unlike representing a beneficiary using a digit in the nominal code, or using a sub-account, using divisions does not require a large number of nominal accounts or sub-accounts to be set up.
• The divisional trial balances, i.e. beneficiary trial balances, can be reported on by the Viztopia Formatter using the Autoload facility.
• However the advantage of not needing separate nominals does mean that the account descriptions for a single account cannot vary by beneficiary.

Divisions are also useful in pension fund accounting. A "hybrid scheme" is partly a "defined contribution scheme" and partly a "defined benefit scheme". Rather than create separate nominal accounts for both parts of the hybrid scheme, Accounts use division 001 to represent the defined benefit element and division 002 to represent the defined contribution part.

• If the scheme is divided into funds then each fund can be allocated to one division or the other.
• If a fund holds a mixture of defined contribution and defined benefit investments then it can be left with no division. At the year end a trial balance can be run for the entries with no division and a journal can be performed to zero the trial balance and allocate the amounts to one division or the other.

Setup

Divisions are easy to set up.

• In Nominal Client Details, tick Use Divisions.
• An option Divisions appears on the Nominal Ledger menu. The divisions and their descriptions are then set up. (Note that they are client-specific.)
• Any funds can now be allocated to the divisions using Funds > Edit Fund.
• Other nominal ledger entries have a field Division on them that can be selected in the usual way using F2.
• The Trial Balance also has an option on it to select All Divisions (the default), a specific Division, or No Division.
• These trial balances can be passed automatically to the Accounts Formatter using Nominal Client Details > Autoload.

Prior Year Divisional Trial Balances

An analysis by division of prior years’ trial balances can be produced as long as you understand the limitations of doing so. The reason for being cautious is that divisional trial balances are calculated by adding up the entries for a period. After running a Year End, adding up the prior year entries may not give the correct trial balance.

There are two reasons for this:

• When the Year End is run it is possible to perform a Clear Down to delete prior year entries.
• If prior year investment entries are made then they affect the investment ledger but not the nominal ledger. (See Prior Year Entries for further details)

As long as you do not perform a Clear Down and do not make any prior year investment entries the prior years' divisional trial balances will be correct.