Hi All, this is my first post here so I'm hoping someone may be able to guide me a little. I'm quite new to QuickBooks and indeed to managing my accounting as a whole, although I'm a fair way down the line. However, I'm still struggling to get to grips with how to deal with dividends. I've gone down the route of the advice I found online referring to creating journal entries.
As such I created a Retained Earnings account to debit then a Provision for Dividend account (Current Liability) to match it to. Those accounts remain.
My basic understanding from this research is that a dividend should be a debit to Retained Earnings and a Credit to Current Liabilities..?
However, actually, if my thought process is right, I don't need to delve into journal entries as I'm simply trying to allocate the payment out of the account that shows up in the Banking section as an outgoing transaction?
In the Banking section you can only select the outgoing dividend payment as an Expense, Cheque or Transfer of course. Clearly its an expense, and I would imagine it should be allocated to the category Provision for Dividends ( Current Liabilities) and classed as No VAT, but then how do I link that outgoing payment to the Retained Earnings account? Or do I not need to as its already a physical payment out, so no need to link it as it's effectively therefore physically deducted from Retained Earnings already.
This may be an absolutely stupid question but I have been trying to get a fluent understanding of it on my own now, on and off, for a few weeks, and nada!!
Any guidance would be absolutely 100% appreciated. THANKS!
Not sure if the reason I have no replies yet is the CAPS LOCK on the title. It puts me off too, I just typed it without looking, but either way would really appreciate any quick tips or advice if possible. Thanks
You need to create a Journal Entry debiting the existing retained earnings account and crediting the liability/dividend account, this would move the amount you owe in dividends from the retained earnings(from the previous year) to the liability account. You would then, when creating the expense from the banking screen, select the liability/dividends account in the category section, this would then debit the liability account.
Please note, we are not trained accountants and any information we provide should be qualified with an accountant.
Hi John C - thanks very much. However, I have done this, creating journal entry in which I debit retained earnings and credit the dividend / liabilities account the same amount, then manually selecting the dividend account as category from the banking screen, but then when I do that it gets added to the dividend account as a 'decrease' to the account, thus cancelling out the journal entry. Am I doing something wrong?!
I should add, this is relating to dividends already paid. All done in right way, in terms of minutes of meeting and declaration of dividend, but meaning that this is logging the dividend as physically already having been paid, not just allocating it as a future liability. In that sense, maybe a journal entry debiting retained earnings, crediting provision for dividend account, then debiting again, this time from the same provision for dividend liability account, thus rendering it zero again..? If so, where does the dividend payment show on the chart of accounts, or is the fact it is a deduction from retained earnings enough? (I would have thought for easy understanding there should be an actual 'dividends paid' account also?) I think this makes sense.. but would be grateful if somebody can correct me or otherwise (again!)