Note
BGL does not provide accounting or taxation advice. The following is designed to act as a guide for Simple Fund 360 users. It is not designed to be accounting or tax advice and should not be taken as a strict guideline. Other methods that are more suitable may be used instead of these steps.
Overview
| Details | Amount per share |
|---|---|
| Dividend Component | $24.15 |
| Capital Component | $4.79 |
| Excess of the Tax Value over the Buy-back Price. | $2.71 |
| Sale Consideration | $7.50
(capital component + excess of the Tax Value over the buy-back price) |
| Buy Back Price | $28.94 |
Instructions
The following components will need to be calculated for the fund's holding of WOW shares:
- Capital proceeds received (Sale Consideration)
- Excess of the Tax Value over the buy-back price
- Dividend
- Capital component of sale consideration
After this, a journal will need to be posted to process the share buy-back
Example
A fund with 1,000 WOW shares participated in the buy-back.
The components of the transaction are calculated as:
- Capital Proceeds: $7.50 x 1,000 = $7,500.00
- Excess of Tax Value: $2.71 x 1,000 = $2,710.00
- Dividend: $24.15 x 1,000 = $24,150
- Bank receipt of buyback price: $28.94 x 1,000 = $28,940
The following journal will need to be posted in Simple Fund 360:
| Account Name | Account Code | Units | Debit | Credit |
|---|---|---|---|---|
| WOW Securities | 77600/WOW.AX | 1,000 | $7,500 | |
| Investment Expense | 37500/WOW.AX | N/A | $2,710 | |
| Dividends Received | 23900/WOW.AX | N/A | $24,150 | |
| Bank | 60400/Bank | N/A | $28,940 |
Investment Expense
The Investment Expense account had the Tax Label set to Not Applicable - Permanent Difference. See Non-deductible tax expense for more details on changing this.
If you wish to create a new account to record this permanent difference, please refer to Add an Account
.