Posting a Dividend payment to owners

Discussion in 'Microsoft Accounting' started by Vikram, Dec 8, 2007.

  1. Vikram

    Vikram Guest

    How do I record a dividend paid to the owners in Office Accounting 2007?
     
    Vikram, Dec 8, 2007
    #1
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  2. Vikram

    Lance [MSFT] Guest

    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?
     
    Lance [MSFT], Dec 20, 2007
    #2
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  3. Vikram

    Vikram Guest

    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?
     
    Vikram, Dec 20, 2007
    #3
  4. Vikram

    Lance [MSFT] Guest

    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?
     
    Lance [MSFT], Jan 3, 2008
    #4
  5. Vikram

    Adrian Guest

    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?
     
    Adrian, May 13, 2009
    #5
  6. Vikram

    DL Guest

    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" <> wrote in message
    news:...
    > 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?
     
    DL, May 13, 2009
    #6
  7. Vikram

    Adrian Guest

    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 :-(
     
    Adrian, May 15, 2009
    #7
  8. Vikram

    DL Guest

    "Adrian" <> wrote in message
    news:...
    >
    > 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
     
    DL, May 16, 2009
    #8
  9. Vikram

    Adrian Guest

    "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.
     
    Adrian, May 16, 2009
    #9
  10. Vikram

    DL Guest

    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" <> wrote in message
    news:...
    > "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.
    >
    >
     
    DL, May 16, 2009
    #10
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