quickbooks - how to account for an annual dividend?!!

[Pish_Pash]

I've googled this, but there's lots of conflicting reports of how to enter an annual dividend! (a bit odd that something seemingly as 'bread & butter' for an accounts package should be obtuse!)

I wonder if any kind soul familiar with Quickbooks, could outline the steps I need to do to enter a dividend payment?

 

[Scalloway]

Have you seen this?

http://smallbusiness.chron.com/account-dividends-quickbooks-61464.html

 

[Philip Hoyle]

If you've used the setup navigator and selected your business being a limited company, QB will have set up a nominal ledger code for dividends which will be set to be a balance sheet/capital & reserves account. If that's the case, it's simply entering the bank payment and allocating it to the dividends account.

If there's no account already set up, then you need to go into chart of accounts and set it up, called dividends, and it's a balance sheet > capital/reserves account.

I think your googling may get you confused as a lot of people go into great detail about proposed dividends versus final dividends and dividends that are credited to a directors loan account instead of being paid out of the bank account. If you're simply paying a dividend, i.e. money out of your business bank account, then keep it simple and just post it to dividends, dated the date it was actually paid (i.e. left the company bank account).

 

[Pish_Pash]

Have you seen this?

http://smallbusiness.chron.com/account-dividends-quickbooks-61464.html

Yes...thanks - saw that one, but the procedure abandoned the reader at step 4........

Step 4
Complete the necessary fields in the New Account window. Consult your account to determine the correct Tax Line to use for the Tax Line drop-down list.

For a start...I can't see any other "necessary fields in the New Account window"...

If there's no account already set up, then you need to go into chart of accounts and set it up, called dividends, and it's a balance sheet > capital/reserves account.

which doesn't seemingly match the link Scalloway referred me too?

I need to lie down or perhaps curl up in the foetal position.....

 

[Scalloway]

Ignore Step 4

Click Save & Close

 

[Pish_Pash]

Ignore Step 4

Click Save & Close

Ok, so now I have a new "Other Current Liability account" called Provision for Dividend.

i therefore move on to the section Recording Dividends"...

Step 2

Click the "Account" column and select the "Retained Earnings" account from the drop-down list if you are using a Retained Earnings account to track dividends. Enter the amount of the dividend in the Debit column. Write a memo, if desired.
If you are using an Equity or Other Current Liability account, select the "Dividend" account from the Account drop-down list. Enter the debit to the Dividend account in the Debit column.

But this is meant to be a step by step guide(!) ...they've gone and abandoned me again. Because if this is the very first time anyone is recording a dividend, then why the...

select the "Retained Earnings" account from the drop-down list if you are using a Retained Earnings account to track dividends

...assomeone using a guide, presumably nobody has a clue whether they are using Retained earnings account to track dividends? (on account they'll not have done it before!)

What is a retained earnings account? & should I create one?! (because I don't have one showing as an account in Quickbooks!)

 

[Scalloway]

Retained earnings is profit you haven't paid out as dividend. Have you completed a year's trading yet?

 

[Pish_Pash]

Retained earnings is profit you haven't paid out as dividend. Have you completed a year's trading yet?

Aah ok thanks...I guess 'retained earnings' is snappier (albeit more opaque) than 'profit not paid out as dividend yet'

Have you completed a year's trading yet?

yes I have. (my financial year ended jan 31st)

Presumably then, since Quickbooks never seems to have anything actually required by me 'out the box' ...I'm going to have to create a new 'retained earnings' account in my chart of accounts....which one of these do I select for a retained earnings account please ....

 

[Scalloway]

Retained earnings is an equity account.

 

[kevin.doran]

I'd be surprised if you do actually need to create a retained earnings account.

Could you provide us with a screen dump of the lower third of your balance sheet as of 1/2/14 - that might shed some light.

 

[Pish_Pash]

Could you provide us with a screen dump of the lower third of your balance sheet as of 1/2/14 - that might shed some light.

Which bit specifically? (the last third of my balance sheet probably shows a bit too much private financial information that I'd want to share here on a public forum!)

 

[Scalloway]

It will be the Capital and Reserves section. Just blank out the numbers, there is no need for us to see them.

 

[Pish_Pash]

Is this sufficient...

...I want to record an annual dividend of £30,000.

 

[Scalloway]

You need to expand the Capital and Reserve section. There should be at least two accounts, Share Capital and Profit & Loss (which may have a different name)

 

[Pish_Pash]

Any better...

(I added the new account called 'retained earnings' after you answered me earlier about it being an equity account)

 

[Scalloway]

Transfer the amount of the proposed dividend to a creditor account - Dividends payable

Transfer what is left in Total Net Income to Retained Earnings.