How to record Director Dividend paid into Directors Loan Accout

AndyA60 · ‎February 12, 2023

Hi,

I am the sole Director of a LTD company and want to pay myself a first dividend, but rather than take the money out as cash, I want to credit it to my directors loan account.

I have the directors loan account set up which currently shows a negative value equal to the amount of cash I personally invested. In my Chart of Accounts I have an Account named "Dividend" which has "Account Type - Other Expenses" and "Detail Type - Other - Other Expenses".

My questions are:-

Firstly, is the Dividend Account set up correctly and,

secondly, what are the step by step instructions to achieve the above.

Thanks in advance

John C · ‎February 13, 2023

Hi AndyA60 We've seen different accountants set up dividends as an equity account and a liability account. You could create a journal entry which would transfer the amount of dividends from the retained earnings account to the dividends account and then again use a journal to transfer the amount from the dividends to the directors loan account, we presume the loan account is a liability account. You could however use one journal to transfer the amount straight from the retained earnings account to the directors loan account therefore reducing the liability owed to you. We note that you say the directors loan account is showing a negative amount. If you have created a liability account and either entered an open balance or created a deposit to that loan account when you sent the money to the business/their bank account, the amount showing should be increasing the liability account/a positive amount.

Please note we're not accountants and we recommend that you qualify the above with an accountant.

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How to record Director Dividend paid into Directors Loan Accout

How to record Director Dividend paid into Directors Loan Accout

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