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QB entries to record S-Corp Dividend Distribution

 
 
MillenniumMan
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      04-14-2004, 08:51 PM
I need help with the step-by-step entries to effect a dividend
distribution to shareholders of an S-Corp. I have seen something
about writing checks to shareholders and then doing an end-of-period
(qtr or yr) journal entry to zero out the retained earnings. I
understand check writing and journal entries, but I do not understand
quite how QB generates "retained earnings". Wouldn't writing the
checks simply reduce the retained earnings?

Also, I would like to do this distribution without actually writing
any checks. I want the dividend distributed to the stockholder (only
1 (me)) and then I want to loan that money back to corporation. This
dividend is on the profit of the corporation after I have paid myself
a salary. This dividend is calculated to use up all of the profits
and should make "retained earnings" for the year be zero.

As the owner of the Corporation, is this dividend considered an "owner
draw" instead of a dividend and handled differently?

Thanks for your help,
Bill
 
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Tee
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      04-14-2004, 09:26 PM
"MillenniumMan" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed) om...
> I need help with the step-by-step entries to effect a dividend
> distribution to shareholders of an S-Corp. I have seen something
> about writing checks to shareholders and then doing an end-of-period
> (qtr or yr) journal entry to zero out the retained earnings. I
> understand check writing and journal entries, but I do not understand
> quite how QB generates "retained earnings". Wouldn't writing the
> checks simply reduce the retained earnings?
>
> Also, I would like to do this distribution without actually writing
> any checks. I want the dividend distributed to the stockholder (only
> 1 (me)) and then I want to loan that money back to corporation. This
> dividend is on the profit of the corporation after I have paid myself
> a salary. This dividend is calculated to use up all of the profits
> and should make "retained earnings" for the year be zero.
>
> As the owner of the Corporation, is this dividend considered an "owner
> draw" instead of a dividend and handled differently?
>
> Thanks for your help,
> Bill


Try posting this to alt.accounting (there's alot of junk posts to weed
through if you want to read but there are some CPAs there) because the only
answers you're likely to get here are to ask your accountant.

--
Tara


 
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Karl Irvin
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      04-14-2004, 09:48 PM
Make a journal entry

Debit retained earnings
Credit stockholder payable.

"MillenniumMan" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed) om...
> I need help with the step-by-step entries to effect a dividend
> distribution to shareholders of an S-Corp. I have seen something
> about writing checks to shareholders and then doing an end-of-period
> (qtr or yr) journal entry to zero out the retained earnings. I
> understand check writing and journal entries, but I do not understand
> quite how QB generates "retained earnings". Wouldn't writing the
> checks simply reduce the retained earnings?
>
> Also, I would like to do this distribution without actually writing
> any checks. I want the dividend distributed to the stockholder (only
> 1 (me)) and then I want to loan that money back to corporation. This
> dividend is on the profit of the corporation after I have paid myself
> a salary. This dividend is calculated to use up all of the profits
> and should make "retained earnings" for the year be zero.
>
> As the owner of the Corporation, is this dividend considered an "owner
> draw" instead of a dividend and handled differently?
>
> Thanks for your help,
> Bill



 
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Allan Martin
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      04-14-2004, 10:11 PM

"MillenniumMan" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed) om...
> I need help with the step-by-step entries to effect a dividend
> distribution to shareholders of an S-Corp. I have seen something
> about writing checks to shareholders and then doing an end-of-period
> (qtr or yr) journal entry to zero out the retained earnings. I
> understand check writing and journal entries, but I do not understand
> quite how QB generates "retained earnings". Wouldn't writing the
> checks simply reduce the retained earnings?
>
> Also, I would like to do this distribution without actually writing
> any checks. I want the dividend distributed to the stockholder (only
> 1 (me)) and then I want to loan that money back to corporation. This
> dividend is on the profit of the corporation after I have paid myself
> a salary. This dividend is calculated to use up all of the profits
> and should make "retained earnings" for the year be zero.
>
> As the owner of the Corporation, is this dividend considered an "owner
> draw" instead of a dividend and handled differently?
>
> Thanks for your help,
> Bill



Biill,

Ask your accountant how do do this and while you are at it ask him/her what
possible reason you can have for doing this in the first place. I'm a CPA
with over 30 years of experience and can't think of a single reason you
would want to do this. I am however eager to learn something new.




 
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Allan Martin
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      04-14-2004, 10:24 PM

"Karl Irvin" <(E-Mail Removed)> wrote in message
news:alifc.37549$wP1.141401@attbi_s54...
> Make a journal entry
>
> Debit retained earnings
> Credit stockholder payable.



There are those myself included that would argue that a Distributions equity
account should be set up to keep track of any distributions.

There are also those that would argue that actual cash should flow back and
forth to effect this transaction rather than by journal entry.

There are also those, myself included who question the need for this
transaction in the first place.




>
> "MillenniumMan" <(E-Mail Removed)> wrote in message
> news:(E-Mail Removed) om...
> > I need help with the step-by-step entries to effect a dividend
> > distribution to shareholders of an S-Corp. I have seen something
> > about writing checks to shareholders and then doing an end-of-period
> > (qtr or yr) journal entry to zero out the retained earnings. I
> > understand check writing and journal entries, but I do not understand
> > quite how QB generates "retained earnings". Wouldn't writing the
> > checks simply reduce the retained earnings?
> >
> > Also, I would like to do this distribution without actually writing
> > any checks. I want the dividend distributed to the stockholder (only
> > 1 (me)) and then I want to loan that money back to corporation. This
> > dividend is on the profit of the corporation after I have paid myself
> > a salary. This dividend is calculated to use up all of the profits
> > and should make "retained earnings" for the year be zero.
> >
> > As the owner of the Corporation, is this dividend considered an "owner
> > draw" instead of a dividend and handled differently?
> >
> > Thanks for your help,
> > Bill

>
>



 
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MillenniumMan
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      04-15-2004, 12:45 PM
"Allan Martin" <(E-Mail Removed)> wrote in message news:<8Gifc.45204$(E-Mail Removed) .net>...
> "MillenniumMan" <(E-Mail Removed)> wrote in message
> news:(E-Mail Removed) om...
> > I need help with the step-by-step entries to effect a dividend
> > distribution to shareholders of an S-Corp. I have seen something
> > about writing checks to shareholders and then doing an end-of-period
> > (qtr or yr) journal entry to zero out the retained earnings. I
> > understand check writing and journal entries, but I do not understand
> > quite how QB generates "retained earnings". Wouldn't writing the
> > checks simply reduce the retained earnings?
> >
> > Also, I would like to do this distribution without actually writing
> > any checks. I want the dividend distributed to the stockholder (only
> > 1 (me)) and then I want to loan that money back to corporation. This
> > dividend is on the profit of the corporation after I have paid myself
> > a salary. This dividend is calculated to use up all of the profits
> > and should make "retained earnings" for the year be zero.
> >
> > As the owner of the Corporation, is this dividend considered an "owner
> > draw" instead of a dividend and handled differently?
> >
> > Thanks for your help,
> > Bill

>
>
> Biill,
>
> Ask your accountant how do do this and while you are at it ask him/her what
> possible reason you can have for doing this in the first place. I'm a CPA
> with over 30 years of experience and can't think of a single reason you
> would want to do this. I am however eager to learn something new.



Thanks for all the input.

In North Carolina we pay a tax (franchise tax) on "Capital Stock,
surplus, and undivided profits". I want to divide the profits by
distributing dividends to lower this tax. I do not need the money
personally now and can leave it in the corporate money market account.
By lumping this money together into a single account, this MM account
pays higher interest rates for balances above $50,000. I can then pay
back the loan as I need personal cash. By tracking this in a "loan
from shareholder" account, it is easier for me to see. The retained
earnings account does not show a balance on the COA and has no
register.

How would you use an equity account to track the dividend
distribution? How would this account effect the retained earnings
automatic calculation?

Thanks
Bill
 
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James
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      04-15-2004, 03:46 PM

"MillenniumMan" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> "Allan Martin" <(E-Mail Removed)> wrote in message

news:<8Gifc.45204$(E-Mail Removed) .net>...

> > > I need help with the step-by-step entries to effect a dividend
> > > distribution to shareholders of an S-Corp. I have seen something
> > > about writing checks to shareholders and then doing an end-of-period
> > > (qtr or yr) journal entry to zero out the retained earnings. I
> > > understand check writing and journal entries, but I do not understand
> > > quite how QB generates "retained earnings". Wouldn't writing the
> > > checks simply reduce the retained earnings?
> > >
> > > Also, I would like to do this distribution without actually writing
> > > any checks. I want the dividend distributed to the stockholder (only
> > > 1 (me)) and then I want to loan that money back to corporation. This
> > > dividend is on the profit of the corporation after I have paid myself
> > > a salary. This dividend is calculated to use up all of the profits
> > > and should make "retained earnings" for the year be zero.
> > >
> > > As the owner of the Corporation, is this dividend considered an "owner
> > > draw" instead of a dividend and handled differently?
> > >
> > > Thanks for your help,
> > > Bill

> >
> > Ask your accountant how do do this and while you are at it ask him/her

what
> > possible reason you can have for doing this in the first place. I'm a

CPA
> > with over 30 years of experience and can't think of a single reason you
> > would want to do this. I am however eager to learn something new.

>
> Thanks for all the input.
>
> In North Carolina we pay a tax (franchise tax) on "Capital Stock,
> surplus, and undivided profits". I want to divide the profits by
> distributing dividends to lower this tax. I do not need the money
> personally now and can leave it in the corporate money market account.
> By lumping this money together into a single account, this MM account
> pays higher interest rates for balances above $50,000. I can then pay
> back the loan as I need personal cash. By tracking this in a "loan
> from shareholder" account, it is easier for me to see. The retained
> earnings account does not show a balance on the COA and has no
> register.
>
> How would you use an equity account to track the dividend
> distribution? How would this account effect the retained earnings
> automatic calculation?
>
> Thanks
> Bill


there are other states that have this type of tax (Virginia on financial
institutions for one example) but there are also regulations preventing
money moving from equity accounts to a majority shareholder's liablity
account -- be sure you understand before doing this !!!!






 
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Allan Martin
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      04-15-2004, 04:31 PM

"MillenniumMan" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed) om...
> "Allan Martin" <(E-Mail Removed)> wrote in message

news:<8Gifc.45204$(E-Mail Removed) .net>...
> > "MillenniumMan" <(E-Mail Removed)> wrote in message
> > news:(E-Mail Removed) om...
> > > I need help with the step-by-step entries to effect a dividend
> > > distribution to shareholders of an S-Corp. I have seen something
> > > about writing checks to shareholders and then doing an end-of-period
> > > (qtr or yr) journal entry to zero out the retained earnings. I
> > > understand check writing and journal entries, but I do not understand
> > > quite how QB generates "retained earnings". Wouldn't writing the
> > > checks simply reduce the retained earnings?
> > >
> > > Also, I would like to do this distribution without actually writing
> > > any checks. I want the dividend distributed to the stockholder (only
> > > 1 (me)) and then I want to loan that money back to corporation. This
> > > dividend is on the profit of the corporation after I have paid myself
> > > a salary. This dividend is calculated to use up all of the profits
> > > and should make "retained earnings" for the year be zero.
> > >
> > > As the owner of the Corporation, is this dividend considered an "owner
> > > draw" instead of a dividend and handled differently?
> > >
> > > Thanks for your help,
> > > Bill

> >
> >
> > Biill,
> >
> > Ask your accountant how do do this and while you are at it ask him/her

what
> > possible reason you can have for doing this in the first place. I'm a

CPA
> > with over 30 years of experience and can't think of a single reason you
> > would want to do this. I am however eager to learn something new.

>
>
> Thanks for all the input.
>
> In North Carolina we pay a tax (franchise tax) on "Capital Stock,
> surplus, and undivided profits". I want to divide the profits by
> distributing dividends to lower this tax. I do not need the money
> personally now and can leave it in the corporate money market account.
> By lumping this money together into a single account, this MM account
> pays higher interest rates for balances above $50,000. I can then pay
> back the loan as I need personal cash. By tracking this in a "loan
> from shareholder" account, it is easier for me to see. The retained
> earnings account does not show a balance on the COA and has no
> register.
>
> How would you use an equity account to track the dividend
> distribution? How would this account effect the retained earnings
> automatic calculation?



On the first day of the new fisal year a journal entry is made zeroing out
any prior year's distributions and charged to AAA (Retained Earnings).


Thanks for the heads up on why you would want to reclassify AAA to a
shareholder loan. I must be honest with you that in my wildest dreams, I
can't image the State of North Carolina not having any rules or regulations
prohibiting this type of sham transaction. Even though I am curious, I so
confident that this is not allowed that I will not waste my time looking it
up to confirm my belief.




>
> Thanks
> Bill



 
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