How to record dividends

When your business earns a profit, you can either reinvest it or distribute it to shareholders as dividends. The board of directors decides the dividend amount, and shareholders must approve it. Record dividends using journal entries.

To create the dividend ledger accounts

To record the proposed dividend, create other ledger accounts in the Equity and Current Liability categories.

1. Go to Settings, Business settings.
2. Under Financial Settings, select Chart of accounts.
3. Click New Ledger Account.
4. Enter the following for the dividend account:
   

   Included in Chart	Leave this selected.
   Ledger Name *	Enter a name for the account (for example, "Dividends").
   Display Name *	Enter the display name ("for example, "Dividends").
   Account Number *	Enter an account number (for example, "3201").
   Category *	Choose Equity.
   Visibility	Leave the defaults selected.

5. Click Save.
6. Click New Ledger Account.
7. Enter details for the dividend liability account:

   Included in Chart	Leave this selected.
   Ledger Name*	Enter a name for the account (for example, "Dividend liability").
   Display Name*	Enter the display name (for example, "Dividend liability").
   Account Number*	Enter an account (for example, "2231").
   Category *	Choose Current Liability.
   Visibility	Leave the defaults selected.

8. Click Save.

To record the proposed dividend

1. Go to Adjustments, Journals.
2. Click New Journal.
3. Enter the date and reference information to use for the transaction.
4. Enter the relevant information to record the proposed dividend.
   • For example:

     Ledger Account *	Details	Debit	Credit
     Dividends (3201)	Proposed dividend	5000.00	0.00
     Dividend liability (2231)	Proposed dividend	0.00	5000.00

5. Click Save.

After you’ve recorded the proposed dividend amount, it appears on your Balance Sheet report as a liability. The system updates the Equity section of the report.

To pay the dividend

1. Go to Banking.
2. Select a bank account.
3. On the New Entry menu, click Expense/Payment.
4. On the Other Payment tab, enter the following information:

   Vendor (optional)	Optionally, select the vendor you’re paying.
   Paid from Bank Account	Select the bank account you want to pay it from.
   Method	Select the payment method.
   Date Paid *	Enter the date you’re making the payment.
   Your Reference (Optional)	If required, enter reference information.
   Amount Paid *	Enter the amount of the payment.
   Ledger Account	Select Dividend liability (2231).
   Details	Enter any additional details for your reference.
   Total	Enter the total amount of the payment.

   If you’re making payments to more than one person, enter a separate line for each person for your records.

5. Click Save.

Recording the payment clears the amount from the dividend liability ledger account. The proposed dividend amount shows on the Balance Sheet report.

To show the payment on a profit and loss ledger account, see the next section.

To move the amount to the profit and loss ledger account

1. Go to Adjustments, Journals.
2. Click New Journal.
3. Enter the date and reference information that you want to use for the transaction.
4. Enter the relevant information to transfer the dividend.
   • For example:

     Ledger Account*	Details	Debit	Credit
     Dividends (3201)	Dividends	0.00	5000.00
     Dividend cost (8900)	Dividends	5000.00	0.00

5. Click Save.

The amount will now show on your Profit and Loss report instead of the Balance Sheet report.