UK P&L Dividend Misposting Correction

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Hi,

Can somebody please help me correct a serious misposting. I've worked for a charity for 15 years. Never dealt with / posted dividends during working career. I manage my partners LTD company business and have for 8 years posted dividends incorrectly and need a journal to correct.

Current posting on XERO -
When recognised -
Debit P&L 'dividend paid'
Credit Balance Sheet 'Directors loan account'

When paid -
Debit Balance Sheet 'Directors Loan account'
Credit Bank

Any help appreciated.
Thank you
 
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When Dividends is declared and paid, it is paid out of Accumulated Retained Earnings - so the correct Accounting Entries are Dr Retained Earnings Cr Loan to Shareholders / Cash at Bank

For the first 7 years of Dividends declared and paid, no need to make any further adjusting entries for the books, because the in current year, your Opening Retained Earnings on the Balance Sheet should be correct, since last years' Dividends payments are deducted from Profit & Loss and this deduction would already be reflected in Closing Retained Earnings of last year.

Just correct for the current year's accounting entry.
 
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When Dividends is declared and paid, it is paid out of Accumulated Retained Earnings - so the correct Accounting Entries are Dr Retained Earnings Cr Loan to Shareholders / Cash at Bank

For the first 7 years of Dividends declared and paid, no need to make any further adjusting entries for the books, because the in current year, your Opening Retained Earnings on the Balance Sheet should be correct, since last years' Dividends payments are deducted from Profit & Loss and this deduction would already be reflected in Closing Retained Earnings of last year.

Just correct for the current year's accounting entry.
 
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Thank you very much for responding. So it’s not as dreadful as i thought.
Another question, what date should these journals be made, year end is 31st March. Should the dividend payable provision be made as at 31st March and then the date paid as the date paid obviously. Or should the dividend payable provision journal date be when realised, for example in my case it may be august once i’ve completed the year end accounts.

Thanks again
 
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The dividends provision should be recorded in the year it has been declared by a Board Resolution. So whichever date a Board Resolution has been authorized to declared dividends, that's when the liability is recorded.
 

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