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Paying Monthly Dividends - Chart of accounts

We take a monthly dividends, however my accountant has set this up as an expense account. So therefore the figures in Quickbooks are showing incorrectly every month, along with it deducting it from our Corp Tax. This is obviously incorrect.  

 

How do you set up dividends which are paid monthly in Quickbooks without setting up as an expense account? A step by step guide would be much appreciated, along with how you transfer them each month (From what account to where etc.)

 

 

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Best answer 06-12-2019

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Frequent Explorer *

Re: Paying Monthly Dividends - Chart of accounts

Hi EvilDrPorkChop

As an accountant, I would set up an account as follows:

Chart of Accounts > New

Account type > Equity

Detail type > Retained Earnings

Name > Dividends

I would then create a bank rule to transfer the payment from the bank account to the dividend account.

This will take the dividend payments out of your P&L and onto your balance sheet, thus reflecting the correct profit and CT.

I'd also be questioning your accountant about there reasoning for setting it up as an expense.

Thanks

Sindy

3 REPLIES 3
Frequent Explorer *

Re: Paying Monthly Dividends - Chart of accounts

Hi EvilDrPorkChop

As an accountant, I would set up an account as follows:

Chart of Accounts > New

Account type > Equity

Detail type > Retained Earnings

Name > Dividends

I would then create a bank rule to transfer the payment from the bank account to the dividend account.

This will take the dividend payments out of your P&L and onto your balance sheet, thus reflecting the correct profit and CT.

I'd also be questioning your accountant about there reasoning for setting it up as an expense.

Thanks

Sindy

Not applicable

Re: Paying Monthly Dividends - Chart of accounts

That's great. 

 

I've gone ahead and changed the Expense account that was created by the accountant to that you have suggested. The figures now seem correct in P & L. 

 

However the Dividend account now shows a minus figure due to what we've withdrawn. Is this correct or should it be a positive figure. 

Frequent Explorer *

Re: Paying Monthly Dividends - Chart of accounts

Hi EvilDrPorkChop

As this is the money you have withdrawn, it will be  a minus, as you are taking your share of the profits available out of the company and reducing retained earning.

Hope that makes sense

Sindy