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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)? I'm not an accountant and there is a lot of posts out there that confuse me.   

Here is the scenario - 

My company recently declared a dividend payment of £20,000 to both shareholders (all the paperwork, vouchers and meetings were correctly followed). I made the relevant payments from the bank to the shareholders. Now I need to recognise this in quickbooks.

Quickbooks online brought in the new transactions automatically under the Banking section. I now have to categorise them. How do I do that? Is it an Expense, I am not sure. I always thought dividend were payments out of profit. How do I record this? If possible, can you spell out the sequence and exactly how I should record it (sorry for my ignorance)
15 REPLIES 15
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Level 3

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

Dividends should be charged to Retained Earnings (part of the Equity group of accounts).

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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

I have just spent 3 hours with QB support and they do not seem to understand this concept.  Paying dividends is a basic company action. Why does a company who creates an accounting package for businesses NOT understand this and create an action for it. It really does beggar belief.

 

The user above asked for step by step instructions. All they got as a response was "pay it out of retained earnings" but no one can explain how. 

 

So the question is, how do you pay it out of retained earnings and please don't say "write a cheque" if that is the answer please explain who you write the cheque to in order to pay the money out without it looking like a purchase on your P&O .

 

Thank you..

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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

Hi, I am very new to Quick books BUT if you look you will find that there is a way of accounting for dividends as retained earnings.

 

You may need to undo the way that you accounted for it - well thats the way that I did it.

 

Re enter as a transfer and retained earnings from equity. This will then show up on your cashflow report as a reduction in retained profit.

 

Looks ok to me , but of course I might be wrong !

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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

 
I selected 'transfer' then 'retained earnings in Equity'.  I then put a memo in saying who the dividend was for  
 
 
 
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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

I don't have my bank linked up to QB yet, does anyone know where I can enter the dividend payments please as I don't have a "transfer" option?

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QuickBooks Team

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?


Hello KimCot,

 

You can create a transfer manually by going to the plus icon > Transfer. Here you can select your bank account under 'transfer from' and retained earnings under 'transfer to'.

 

Thanks,

 

Talia

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Level 3

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

Much easier to use dividends as an other expense account rather than dividends as an equity account, this way it will clear down to the retained earnings account at the start or a new year.
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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

Absolutely agree with you, QB assistant I used to ask for help is lack of accounting knowledge, I even let her remote my desktop, and when I saw she tried to make dummy entries I noticed she needs more training. She doesn't know PST self-assess concept, tax code, etc.

QB doesn't have dividend accounts bot both dividend we receive and dividend we pay to shareholders, it only can say QB seems more suitable for very simple business like proprietorship. Hope they can improve, but for bigger cooperation, it is really not recommended to use it. Sorry


@AB33 wrote:

I have just spent 3 hours with QB support and they do not seem to understand this concept.  Paying dividends is a basic company action. Why does a company who creates an accounting package for businesses NOT understand this and create an action for it. It really does beggar belief.

 

The user above asked for step by step instructions. All they got as a response was "pay it out of retained earnings" but no one can explain how. 

 

So the question is, how do you pay it out of retained earnings and please don't say "write a cheque" if that is the answer please explain who you write the cheque to in order to pay the money out without it looking like a purchase on your P&O .

 

Thank you..


 

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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

Hi Paul, I'm 99.9% sure that using an expense account at any time when working with Dividends is a no no.

The reason being is that Expense accounts hit the P&L and dividends are Balance Sheet Accounts.

We found this out by error, using the stock Dividend Account which is in the Accounts List when we started using QB online.

 

Our workflow is:

Board Meeting, Meeting Minutes created, Tax Vouchers Issued, Journal Entries in QB for Current Liabilities, Paid from Retained Earnings (Previous all tax paid up profits). You MUST be in profit to issue a dividend by tax law. You can't borrow to pay dividends.

 

We create a 2 line Journal Entry from the Add button at the top of the screen and just sit back, patting ourselves on the back at how awesome we are.

 

When we pay the dividend on the declared date, we reconcile the bank transaction to the dividend liability account.

 

If it's our half year dividend distribution, we add a Journal Entry to add funds to the Corporation Tax Liability Account until year end, as well, for the dividend distribution amount only. Eg if we're paying out £1000 of £8000 half year profit, we save 19% of the £1000 distribution only, in case we eat the rest of the profit in expenditure in H2 of the year.

 

At year end, we assign corporation tax balance payment to the Corporation Tax Liability Account, and put the balance of any Profit in to the retained earnings account, then repeat the meeting, documentation, QB entries and Distribution steps above.

 

Don't forget to add the dividend income to your Self Assessment return and pay the 7.5% tax (or higher if you're minted) if you reach the PAYE allowance plus £2000 Dividend allowance total income threshold for the year.

 

I am more than happy for some accounting genius to pick holes in my approach and feedback.

 

Cheers,

Paul.

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Level 2

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

I have recorded dividends paid to my wife and myself under "Dividends Payable" which is set as a current which is set as a current liability in QB chart of accounts

 

This is fine from the perspective that it does not affect the P&L as it is not seen as an expense BUT i haven't got a clue at all how to clear that current liability as it has been paid already and left my business bank account

 

I can't find anywhere how this should be handled - it is a basic business requirement like recording sales / expenses yet no formal explanation from QB on how to manage this activity.

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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

Hi, 

 

They should have told you "Close" it into the Retained Earnings. 

 

You have to record it first against the Dividends Paid (Equity Account) *, then at YE or at Jan 1st next year create a Journal Entry to close the Dividends Paid into Retained Earnings. 

 

* Detailed Type: Owner's Equity.

 

Hope that Helps. 

 

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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

To clear the dividends payable account you would need make a General Journal Entry by doing the following;

 

debiting the "retained earnings (equity account)"

and

credit the "Dividends Payable (Currently Liability)" account.

 

To double check it worked you can always go into your chart of accounts and it will show $0.00 sitting in the Dividends Payable.

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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

when it is declared

Dividend   P/L          £500 DR

Dividend Payable B/S       £500 CR

-------------------------------------------------------

When it is recorded as a Paid: (transaction date must be  paid date)

Dividend Payable B/S £500 DR

Bank/Cash/DLA   B/S      £500 CR

------------------------------------------------------------

 

 

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Level 1

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

I spent over an hour on QB help trying to get the call handler to understand the concept of what I want. I want dividends paid in the year to show under equity dividends so that the balance sheet is right. I then expected the QB year end system to add up the retained profit brought forward plus the aggregate of all the P&L accounts in the year then take off dividends paid to give me the retained profit figure for the start of the new financial year.

 

QB year end close does NOT clear dividends paid to off retained profits. Over time the retained profit figure would just rise and rise and the dividends paid figure would also rise and rise. Ridiculous.

Don't get me started on how the fixed asset system should work - but doesn't.

 

QB help usually tell me to speak to my accountant and seem at a loss when I tell them I AM an accountant.

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QuickBooks Team

Can someone help with how I record dividends paid to directors in the UK (quickbooks online)?

Hi @DMcK52,

 

Since the retained earnings account is a rollover of all your previous financial years net profit, you'll want to run a quick report of your retained earnings to see if there are transactions entered against this account which contributes to the rising of its figure.

 

Here's how to run a quick report:

 

  1. Go to Accounting, then Chart of Accounts.
  2. Search the Retained Earnings account.
  3. Click Run report under Action column.
  4. Change the Report period, then Run report.

If there are no transactions entered, you can create a journal entry of the retained earnings account and distribute the amount among your shareholder's account. You can learn more about the retained earnings account at this link here: How to view your Retained Earnings account.

 

We also have a guide on reports which you might find helpful. It has links and articles that'll guide you through.

 

If there's anything else you need help with, feel welcome to leave a message anytime. Thanks for coming in today and I wish you have a good day.