Everything ABOUT 😊😊😊 PRIVATE EQUITY/Fund Accounting 😉🥰🥰

Private Equity — GP & LP Accounting (Blog-ready)

Private Equity — Accounting: GP & LP Perspectives

A blog-ready, color-styled, copy-paste HTML on how capital activity is recorded and reported by General Partners (GPs) and Limited Partners (LPs). Includes journal entries, eFront notes and management reporting tips.

Overview — quick pills

Private Equity

GP Accounting

LP Accounting

This article focuses on accounting flows between the fund (managed by GP), investors (LPs) and portfolio companies. It also shows sample journal entries and explains how these are typically configured in fund accounting systems such as eFront.

1. Key concepts (reminder)

Commitment: The total amount an LP agrees to provide to a fund.
Capital Call (Drawdown): A request by GP to LPs to fund part of their commitment.
Distribution: Cash or stock returned to LPs from exits or returns.
Management Fee: Fee charged by GP (usually % of committed or invested capital) to cover operating costs.
Carried Interest (Carry): GP's share of profits (often 20% of gains above preferred return).
NAV: Net Asset Value of the fund (market/valuation based).

2. GP (General Partner) — Accounting & Journal Entries

The GP has two roles: (A) As manager (managing company entity) to which management fees and carry accrues; (B) As the fund manager (acting for the fund entity). Accounting must separately reflect fund-level entries and GP corporate-level entries.

2.1 Fund-level accounting (books of the fund)

Typical fund-level journal entries (cash-basis or accruals depending on policy):


Journal: Capital call received Dr Cash/Bank Cr Receivable from LPs (Capital call receivable)

Journal: Investment made (buyout, subscription) Dr Investment in Portfolio Co. Cr Cash/Bank

Journal: Distributions to LPs Dr Distributions Payable / Retained Earnings Cr Cash/Bank

Journal: Management fee charged to fund Dr Management Fee Expense Cr Payable to GP (Management fee payable)

Note: The fund typically records management fee as an expense and a payable to the GP (or GP affiliate). The GP recognizes the fee as revenue in its corporate books when earned and collected.

2.2 GP corporate-level accounting (GP/Management Co.)

GP corporate entity records management fee income, operating expenses and its own tax/treatment of carried interest.


Journal: Management fee recognized (GP books) Dr Receivable from Fund (Management fee receivable) Cr Management Fee Income

Journal: When GP collects fee from fund Dr Cash/Bank Cr Receivable from Fund

Journal: Carried interest accrual (when crystallized) Dr Carried Interest Receivable (from fund) Cr Carried Interest Income (GP)

Journal: GP pays its operating expenses Dr Operating Expense Cr Cash/Bank

Important: Carried interest recognition follows the fund's waterfall and distribution mechanics — often recognized only when the LPs have received priority returns and the carry is due.

2.3 Waterfall and Carry — accounting implications

Waterfalls (simple example):

Return of capital to LPs
Preferred return (hurdle) to LPs
Catch-up to GP
Carried interest split (e.g., 80/20 LP/GP)

Account for carry when conditions for distribution are met; until then, disclose as contingent/commitment in notes or track as memo entries depending on policy.

3. LP (Limited Partner) — Accounting & Journal Entries

LPs typically maintain investor accounting at entity level (e.g., pension fund accounting, treasury). The key items recorded are commitments, contributions (capital calls), distributions, and carried interest allocations.

Event	Typical LP Journal Entry
Commitment made (no cash yet)	Disclosure only / memo note; no entry until capital call
Capital call received (LP pays)	Dr Investment in Fund (or Fund Subscription) Cr Cash/Bank
Receipt of distribution	Dr Cash/Bank Cr Realized gain on investment (or reduce investment cost)
Management fee charged to LP (via fund)	Recorded as part of LP's return calculation; often reduces NAV — GP charge is not separately booked by LP unless direct fee allocation exists.
Allocation of carried interest	LP recognizes its share of profits net of carry. Carry is not an LP expense account but reduces the distributable amount; LP records net gain/loss.

Practical: LPs frequently use investment accounting modules to track commitments, called capital, unfunded commitments, NAV by fund and IRR/MOIC at entity and fund level.

4. Capital Activity — End-to-end (GP & LP view)

From GP / Fund perspective

Issue capital call → fund records a Receivable from LPs
LPs transfer cash → fund converts Receivable to Cash
Fund invests cash into portfolio companies → records Investments
Exits generate proceeds → record gains and create Distribution Payable
Pay management fee to GP affiliate → record Expense & Payable

From LP perspective

Record commitment (memo)
When called, transfer cash → record Investment in Fund
Receive distributions → reduce investment and record gains
Monitor unfunded commitments and IRR

5. How to configure / record in eFront

eFront is configured to track investor commitments, capital calls, NAV, and LP-level statements. Typical configuration tips:

Set up the fund entity and link GPs and LPs as counterparties.
Record commitments at LP profile and map to fund subscription schedules.
When a capital call is issued, create a capital call event in eFront: it will create receivables linked to each LP by pro-rata commitment.
When cash arrives, reconcile against the capital call receivable at LP level.
Record investments and mark-to-market valuations to update NAV (use valuation events).
Set management fee schedules (fixed % on committed or invested capital) so eFront accrues fees automatically and produces payable postings to GP.
Configure waterfall rules for distributions — eFront supports waterfall templates to calculate carry and distribution splits to LP/GP.

Sample accounting flow in eFront:


1. Create Capital Call (Event):

System posts: Dr Capital Call Receivable (LP A) Cr Capital Call Liability (Fund level memo)



2. LP payment matched:

Dr Cash/Bank (Fund) Cr Capital Call Receivable (LP A)



3. Investment booked:

Dr Investment in Portfolio Co. Cr Cash/Bank



4. Management fee accrual:

Dr Management Fee Expense (Fund) Cr Management Fee Payable (to GP)



5. Distribution payable (after exit):

Dr Realized Gain on Investment Cr Distributions Payable

Tip: Use the eFront reconciliation module to reconcile bank receipts against capital call receivables and to produce LP statements (capital account, activity, IRR).

6. Management Report / Cost Report — What to include

Management report (GP → LPs / internal):

Executive summary (performance highlights)
Fund-level KPIs: NAV, IRR (since inception & YTD), MOIC, DPI (Distributions to Paid-In)
Capital activity: Called, Called & Unfunded, Distributed
Portfolio company updates (value drivers, KPIs, valuations)
Upcoming capital calls / pipeline

Cost report (for fund / GP internal):

Management fees earned and outstanding
Operating expenses charged to fund (broken down by transaction, legal, advisory)
Fund-level expense allocation methods
Carried interest calculations and timing

7. Important metrics & controls

IRR & MOIC — measure time-weighted and multiple returns
DPI (Distributions / Paid-in) — realised return measure
RVPI (Residual Value / Paid-in) — unrealised return measure
Compliance controls — KYC/AML for LPs, FATCA/CRS reporting
Audit trail — capital call memos, signed subscription agreements, bank confirmations

8. Quick example: Journal entries (end-to-end)


A) Fund issues a 10% capital call on a 100m fund (LP A commitment 10m) Fund books receivable: Dr Capital Call Receivable - LP A        1,000,000 Cr Capital Call Payable (memo)         1,000,000

LP A pays: (LP books) Dr Investment in Fund - Fund X           1,000,000 Cr Cash/Bank                           1,000,000

(Fund books upon receipt) Dr Cash/Bank                             1,000,000 Cr Capital Call Receivable - LP A      1,000,000

B) Fund pays management fee 2% on committed capital (annual) = 200,000 (Fund books) Dr Management Fee Expense                 200,000 Cr Management Fee Payable (to GP)      200,000

(GP books when invoice received) Dr Receivable from Fund                   200,000 Cr Management Fee Income                200,000

C) Exit and distribution (simple): Fund sells investment for 2,000,000 (cost 1,200,000) Dr Cash/Bank                             2,000,000 Cr Investment in Portfolio Co.         1,200,000 Cr Realized Gain on Investment           800,000

Post-waterfall, distribute 700,000 to LPs and 100,000 as carried interest to GP Dr Realized Gain on Investment             800,000 Cr Distribution Payable - LPs            700,000 Cr Carried Interest Payable - GP         100,000

(LP receives distribution: reduce investment / record gain) Dr Cash/Bank                            700,000 Cr Investment in Fund                 700,000 (or Realized Gain depending on LP policy)

9. Blog styling & SEO tips

Use H1 & H2 for primary keywords: "Private Equity Accounting", "GP LP Accounting"
Include tables for quick reference (commitment vs called vs distributed)
Use color highlights for journal samples and key metrics (as done here)
Offer a downloadable PDF or HTML (this file) for readers who want a ready reference

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