How to allocate profit in LLP accounts

There are two ways to allocate Profit in LLP accounts:

Option 1

If the profit for the year is automatically divided between the members without further discussion, then it should be charged to the profit and loss account as an expense. 

This is likely to be the case where 100% of the profit is allocated according to the profit sharing arrangements. Under this basis, the profit does not appear in 'other reserves' in the members reconciliation

Journal Entry required:

Option 2

Where the profit is allocated on a discretionary basis each year then the profit appears in other reserves and is then allocated to creditors. 

Journal Entry required:

Note: The above journal will need to be changed if the profit is in any way altered. 

It is also possible to have a combination of the two. For example, where part of the profit is automatically allocated with the balance being shared on a discretionary basis.