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Posting a Dividend payment to owners

 
 
Vikram
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      12-08-2007, 10:09 AM
How do I record a dividend paid to the owners in Office Accounting 2007?
 
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Lance [MSFT]
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      12-20-2007, 07:55 PM

What you want to record is a credit to the bank account from which you paid
the dividends and an offsetting debit to whatever equity account you use to
track dividends paid.

Either the journal entry form (on company menu) or the transfer funds form
(on the banking menu) can be used to enter this.

Hope this helps.

"Vikram" wrote:

> How do I record a dividend paid to the owners in Office Accounting 2007?

 
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Vikram
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      12-20-2007, 10:58 PM
Lance,
Did you mean debit the bank account and credit the equity account?
Vikram

"Lance [MSFT]" wrote:

>
> What you want to record is a credit to the bank account from which you paid
> the dividends and an offsetting debit to whatever equity account you use to
> track dividends paid.
>
> Either the journal entry form (on company menu) or the transfer funds form
> (on the banking menu) can be used to enter this.
>
> Hope this helps.
>
> "Vikram" wrote:
>
> > How do I record a dividend paid to the owners in Office Accounting 2007?

 
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Lance [MSFT]
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      01-03-2008, 08:53 PM
Credits and Debits can be confusing.

The general rule is

1) Assets and Expenses are increased by debits and decreased by credits.
2) Liabilities, Income, and Equity are increased by credits and decreased by
debits.


Since we paid dividends by sending money to the owners, that would
presumably reduce the balance of the bank account from which we paid. Since
bank accounts are assets, we credit them to reduce the value.

Paying the dividend reduces the equity in the business, so the offsetting
entry needs to reduce equity. To do this we would debit an equity account.

"Vikram" wrote:

> Lance,
> Did you mean debit the bank account and credit the equity account?
> Vikram
>
> "Lance [MSFT]" wrote:
>
> >
> > What you want to record is a credit to the bank account from which you paid
> > the dividends and an offsetting debit to whatever equity account you use to
> > track dividends paid.
> >
> > Either the journal entry form (on company menu) or the transfer funds form
> > (on the banking menu) can be used to enter this.
> >
> > Hope this helps.
> >
> > "Vikram" wrote:
> >
> > > How do I record a dividend paid to the owners in Office Accounting 2007?

 
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Adrian
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      05-13-2009, 09:56 PM
Okay, So I understand now how to to record the dividend payment without
reducing the profit. Thank you Lance for an explanation that even my
engineer's brain can understand.

The next step relating to dividends and profits is to set aside some money
to pay the corporation tax in a few month's time. Again, it does not want to
come of the profit.

My guess is that make a journal entry and credit the tax amount from
"retained earnings" and debit an equity account. This is the first time for
me and every UK company making a profit must face the same issue, so can
anyone please explain (with Lance's lucidity) how to account for money set
aside to pay corporation tax?



Lance [MSFT]" wrote:

> Credits and Debits can be confusing.
>
> The general rule is
>
> 1) Assets and Expenses are increased by debits and decreased by credits.
> 2) Liabilities, Income, and Equity are increased by credits and decreased by
> debits.
>
>
> Since we paid dividends by sending money to the owners, that would
> presumably reduce the balance of the bank account from which we paid. Since
> bank accounts are assets, we credit them to reduce the value.
>
> Paying the dividend reduces the equity in the business, so the offsetting
> entry needs to reduce equity. To do this we would debit an equity account.
>
> "Vikram" wrote:
>
> > Lance,
> > Did you mean debit the bank account and credit the equity account?
> > Vikram
> >
> > "Lance [MSFT]" wrote:
> >
> > >
> > > What you want to record is a credit to the bank account from which you paid
> > > the dividends and an offsetting debit to whatever equity account you use to
> > > track dividends paid.
> > >
> > > Either the journal entry form (on company menu) or the transfer funds form
> > > (on the banking menu) can be used to enter this.
> > >
> > > Hope this helps.
> > >
> > > "Vikram" wrote:
> > >
> > > > How do I record a dividend paid to the owners in Office Accounting 2007?

 
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DL
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      05-13-2009, 10:46 PM
I'm curious; how do you propose to prepare/submit your accounts to HMRC?,
sba doesnt produce accounts that comply with the requirements of the
Companies Act

The usual method of 'setting aside' monies to pay for such liabilities is to
transfer monies to a high interest Bank account. Holding / transfering
monies to a seperate Company account has no baring on profits
BTW you have posted to primarily the US group, the UK group being
microsoft.public.uk.moa

"Adrian" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> Okay, So I understand now how to to record the dividend payment without
> reducing the profit. Thank you Lance for an explanation that even my
> engineer's brain can understand.
>
> The next step relating to dividends and profits is to set aside some money
> to pay the corporation tax in a few month's time. Again, it does not want
> to
> come of the profit.
>
> My guess is that make a journal entry and credit the tax amount from
> "retained earnings" and debit an equity account. This is the first time
> for
> me and every UK company making a profit must face the same issue, so can
> anyone please explain (with Lance's lucidity) how to account for money set
> aside to pay corporation tax?
>
>
>
> Lance [MSFT]" wrote:
>
>> Credits and Debits can be confusing.
>>
>> The general rule is
>>
>> 1) Assets and Expenses are increased by debits and decreased by credits.
>> 2) Liabilities, Income, and Equity are increased by credits and decreased
>> by
>> debits.
>>
>>
>> Since we paid dividends by sending money to the owners, that would
>> presumably reduce the balance of the bank account from which we paid.
>> Since
>> bank accounts are assets, we credit them to reduce the value.
>>
>> Paying the dividend reduces the equity in the business, so the offsetting
>> entry needs to reduce equity. To do this we would debit an equity
>> account.
>>
>> "Vikram" wrote:
>>
>> > Lance,
>> > Did you mean debit the bank account and credit the equity account?
>> > Vikram
>> >
>> > "Lance [MSFT]" wrote:
>> >
>> > >
>> > > What you want to record is a credit to the bank account from which
>> > > you paid
>> > > the dividends and an offsetting debit to whatever equity account you
>> > > use to
>> > > track dividends paid.
>> > >
>> > > Either the journal entry form (on company menu) or the transfer funds
>> > > form
>> > > (on the banking menu) can be used to enter this.
>> > >
>> > > Hope this helps.
>> > >
>> > > "Vikram" wrote:
>> > >
>> > > > How do I record a dividend paid to the owners in Office Accounting
>> > > > 2007?



 
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Adrian
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      05-15-2009, 07:54 PM
DL asked

> I'm curious; how do you propose to prepare/submit your accounts to HMRC?,
> sba doesnt produce accounts that comply with the requirements of the
> Companies Act


Thanks for your reply DL!

The Companies Act requires accounts to be "reasonably accurate" and the rest
of that is open to interpretation. It is possible to produce accounts that
comply with the Companies Act using a paper based system, and where SBA is a
glorified calculator it must be somewhere near.

HMRC is different - Compaies House will accept abbreviated accounts but HMRC
wants to see more detail, particularly in the tax return: They want to see
where the entries on the tax return are derived from on the accounts. So long
as this is explained, the HMRC do not insist on a prerequisite format for the
accounts. Mine is a one-person Ltd company with reasonably simple
transaction records. Last year HMRC were happy with a couple of sheets (P&L
and BS) which had been derived from a home-spun system. MS's offering is,
for me, much more advanced and less time consuming than poliching a home made
database application.

More advanced businesses may well require a more sophisticated system.

> The usual method of 'setting aside' monies to pay for such liabilities is to
> transfer monies to a high interest Bank account. Holding / transfering
> monies to a seperate Company account has no baring on profits


Yup, appreciated. What I was after, and what I have since worked out, was
how to record, within the application, the setting aside of money for tax
where it does not leave the bank account. The answer is a journal entry
transferring the relevant amount out of the bank account and into a long term
liability account. I was after an effect where the balance sheet changes but
not the gross profit.

> BTW you have posted to primarily the US group, the UK group being
> microsoft.public.uk.moa


Appreciated. I picked this thread because the answers re: recording
dividends (related issue) was correct here, but incomprehensible on the UK
thread :-(


 
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DL
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      05-16-2009, 08:39 AM

"Adrian" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
>
> HMRC is different - Compaies House will accept abbreviated accounts but
> HMRC
> wants to see more detail, particularly in the tax return: They want to see
> where the entries on the tax return are derived from on the accounts. So
> long
> as this is explained, the HMRC do not insist on a prerequisite format for
> the
> accounts. Mine is a one-person Ltd company with reasonably simple
> transaction records. Last year HMRC were happy with a couple of sheets
> (P&L
> and BS) which had been derived from a home-spun system. MS's offering is,
> for me, much more advanced and less time consuming than poliching a home
> made
> database application.


The CT600 only requires entries for turnover & total allowable expenses,
these entries should be obvious in your P&L, no further expansion /
explanation of expenses is required, unless the inspector is querying your
return

>
> Yup, appreciated. What I was after, and what I have since worked out, was
> how to record, within the application, the setting aside of money for tax
> where it does not leave the bank account. The answer is a journal entry
> transferring the relevant amount out of the bank account and into a long
> term
> liability account. I was after an effect where the balance sheet changes
> but
> not the gross profit.
>


A Bank account is a creditors Balance Sheet account if you transfer from one
Bank acc to another it has no impact on GP
No Journal entry is required, If such a transfer does reflect in the P&L GP
then your P&L entries / accounts are not correct.
eg The default P&L setup in moa shows Dividends as an expense, which are
then deducted to produce the Profit/loss
This is incorrect, Dividends are not a deductable expense

I trust I've understood your post correctly


 
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Adrian
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      05-16-2009, 11:57 AM
"DL" wrote:



> A Bank account is a creditors Balance Sheet account if you transfer from one
> Bank acc to another it has no impact on GP
> No Journal entry is required, If such a transfer does reflect in the P&L GP
> then your P&L entries / accounts are not correct.


Yes, understood. However I don't have a high interest bank account (does
anyone these days??? ha!). I want to reserve an amount of money for
corporation tax but without moving it to another bank account. All I was
after, and what I have now found, is a solution to earmark the money as a
long term liability. When the money is not being moved from one real bank
account to another, a journal entry is required to set the corporation tax
aside as a long term liability.

> eg The default P&L setup in moa shows Dividends as an expense, which are
> then deducted to produce the Profit/loss
> This is incorrect, Dividends are not a deductable expense


Yes!!! This is what threw me in the first place. One would think the default
setup made sense but the "dividends" account does not. There is another
account in the default setup called "Distributions" which, as an equity
account, is suitable.


 
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DL
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      05-16-2009, 04:48 PM
Generally you would post to Dividends acc, but then export both P&L and BS
to excel, manipulate in excel to produce a corrected P&L and BS

"Adrian" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> "DL" wrote:
>
>
>
>> A Bank account is a creditors Balance Sheet account if you transfer from
>> one
>> Bank acc to another it has no impact on GP
>> No Journal entry is required, If such a transfer does reflect in the P&L
>> GP
>> then your P&L entries / accounts are not correct.

>
> Yes, understood. However I don't have a high interest bank account (does
> anyone these days??? ha!). I want to reserve an amount of money for
> corporation tax but without moving it to another bank account. All I was
> after, and what I have now found, is a solution to earmark the money as a
> long term liability. When the money is not being moved from one real bank
> account to another, a journal entry is required to set the corporation tax
> aside as a long term liability.
>
> > eg The default P&L setup in moa shows Dividends as an expense, which are
>> then deducted to produce the Profit/loss
>> This is incorrect, Dividends are not a deductable expense

>
> Yes!!! This is what threw me in the first place. One would think the
> default
> setup made sense but the "dividends" account does not. There is another
> account in the default setup called "Distributions" which, as an equity
> account, is suitable.
>
>



 
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