Paying dividends in a private ltd company: what account to use?

[D.M. Procida]

To pay myself a dividend in a private limited company I understand I
should allocate the amount to an expense account. Should I just call it
"dividends" or something?

Doesn't this screw up the profit figures? If the business has made a
£10K profit and £8K of it is handed out as a dividend, it will make the
business look less profitable, won't it?

Thanks for any help,

Daniele

 

[Troy Steadman]

message

To pay myself a dividend in a private limited company I understand I
should allocate the amount to an expense account. Should I just call it
"dividends" or something?

Yes but not to any old Expense Account. You have a Net Profit figure (on
which your Corporation Tax computation will be based - you have remember
the Tax?), and that will give you a "Profit after Taxation" figure, then
you will:

Dr Dividends Payable/Paid (P&L)
Cr Director's Loan Account (BSheet)

....and your accounts will show a remainder which will be transferred to
the Profit and Loss A/C in the Balance Sheet when you close the accounts
down.

Doesn't this screw up the profit figures? If the business has made a
£10K profit and £8K of it is handed out as a dividend, it will make the
business look less profitable, won't it?

Thanks for any help,

Daniele

Before you do that Daniele you might consider running your figures past
us - just rough ball park figures - and see if the experienced eyes of
our regulars can spot any ball-park errors!


--

 

[Ronald Raygun]

...and your accounts will show a remainder which will be transferred to
the Profit and Loss A/C in the Balance Sheet when you close the accounts
down.

... - and see if the experienced eyes of
our regulars can spot any ball-park errors!

Speaking of ball-park errors, can you expand a bit on this novel
concept of a P&L a/c *in* the BS?

Could it be that something has gone awry in the projection of Troy's
4D fairytale back into the real 2D world?

 

[Martin]

Speaking of ball-park errors, can you expand a bit on this novel
concept of a P&L a/c *in* the BS?

Methinks he means retained losses

Could it be that something has gone awry in the projection of Troy's
4D fairytale back into the real 2D world?

Nope - in true M$ style, it won't fall over until it's through its beta test

 

[D.M. Procida]

Yes but not to any old Expense Account. You have a Net Profit figure (on
which your Corporation Tax computation will be based - you have remember
the Tax?), and that will give you a "Profit after Taxation" figure

OK - I'm using MYOB for my accounts. So, I'll create an account called
Dividends paid, and I have a choice of making it an Expense account, or
an Other Expense account.

MYOB generates an Operating Profit figure based on Expenses, and a Net
profit figure, which includes the Other Income/Expenses accounts. Unless
I make the Dividends account one of these Other Expenses accounts, I
can't see a way to make MYOB report on profits separately before and
after dividends.

then you will:

Dr Dividends Payable/Paid (P&L)
Cr Director's Loan Account (BSheet)

...and your accounts will show a remainder which will be transferred to
the Profit and Loss A/C in the Balance Sheet when you close the accounts
down.
OK.

Before you do that Daniele you might consider running your figures past
us - just rough ball park figures - and see if the experienced eyes of
our regulars can spot any ball-park errors!

I well do.

Thanks,

Daniele

 

[Troy Steadman]

Methinks he means retained losses

Nope - in true M$ style, it won't fall over until it's through its beta test

Are you lot still quibbling over semantics? P&L Reserve is a perfectly
sensible name for Retained Profits and conforms to IAS [whistles]. How
come none of you are tackling my Excel questions? You can join in
Question 3 Ronald...

What is the quickest calculation to average 3 figures so that zeroes are
not included in the averages?

Average of 4,4,4=4, average of 0,4,4=4, average of 0,0,4=4.

Clue: In Boolean mathematics TRUE is 1, FALSE is 0.


--

 

[Martin]

How
come none of you are tackling my Excel questions? You can join in
Question 3 Ronald...

You cheeky bu**er. Answered them yonks ago. Check you mail.

Where's the next set of questions, and where's my prize?

What is the quickest calculation to average 3 figures so that zeroes are
not included in the averages?

OK - I'll have a guess...

=SUM(A1:A3)/COUNTIF(A1:A3,"<>0")


I've shown you mine, so now you show me yours ...

Average of 4,4,4=4, average of 0,4,4=4, average of 0,0,4=4.

Clue: In Boolean mathematics TRUE is 1, FALSE is 0.

You don't say...

 

[Troy Steadman]

OK - I'll have a guess...

=SUM(A1:A3)/COUNTIF(A1:A3,"<>0")

Blimey, the answer I was thinking of is:

A1+A2+A3/(A1<>0 + A2<>0 + A3<>0)

....COUNTIF() is outside my range of experience as well, I can see I am
going to have to brush up my Excel!






--

 

[John-Smith]

MYOB generates an Operating Profit figure based on Expenses, and a Net
profit figure, which includes the Other Income/Expenses accounts. Unless
I make the Dividends account one of these Other Expenses accounts, I
can't see a way to make MYOB report on profits separately before and
after dividends.

Surely, dividends don't affect the profit.... Salary does, but
dividends don't.

 

[Troy Steadman]

Blimey, the answer I was thinking of is:

A1+A2+A3/(A1<>0 + A2<>0 + A3<>0)

make that:

(A1+A2+A3) / ((A1<>0) + (A2<>0) + (A3<>0))


--

 

[Martin]

Surely, dividends don't affect the profit.... Salary does, but
dividends don't.

Always be clear what you mean by "profit"

Eg (deducting items in parentheses)...

P+L account for the year
===================
Turnover
(Cost of sales)
Gross profit
(Administrative expenses)
Operating profit / (loss)
Interest received
(Interest paid)
Profit / (loss) on ordinary activities before taxation
(Taxation)
Profit / (loss) on ordinary activities after taxation
(Dividends)
Retained profit / (loss) for the year

At this point, there are 5 lines labelled "profit" - all different. Then
you get...

Retained profit / (loss) brought forward
Retained profit / (loss) carried forward

HTH

 

[Ronald Raygun]

make that:

(A1+A2+A3) / ((A1<>0) + (A2<>0) + (A3<>0))

I don't know about Excel, but in Kspread it doesn't work.

True+True+True comes out as 0, whereas 1+True+2 is 3.

:-(

Try to write portable programs.
As I said, it's naughty to try to do arithmetic on booleans.

 

[Tim]

OK - I'll have a guess...
=SUM(A1:A3)/COUNTIF(A1:A3,"<>0")

Isn't that a bit cumbersome? Leave out the zeroes (make those cells blank -
it even looks better too!), and then there is a neater formula which you can
use...

 

[Tim]

make that:
(A1+A2+A3) / ((A1<>0) + (A2<>0) + (A3<>0))

Yuck! Wotcha gonna do when there are *ten* years data to average? Or
twenty ...

 

[John-Smith]

Always be clear what you mean by "profit"

Eg (deducting items in parentheses)...

P+L account for the year
===================
Turnover
(Cost of sales)
Gross profit
(Administrative expenses)
Operating profit / (loss)
Interest received
(Interest paid)
Profit / (loss) on ordinary activities before taxation
(Taxation)
Profit / (loss) on ordinary activities after taxation
(Dividends)
Retained profit / (loss) for the year

At this point, there are 5 lines labelled "profit" - all different. Then
you get...

Retained profit / (loss) brought forward
Retained profit / (loss) carried forward

HTH

IOW, while the net profit is reduced by the dividend, the corporation
tax liability isn't?

 

[Tim]

I don't know about Excel, but in Kspread it doesn't work.
True+True+True comes out as 0, whereas 1+True+2 is 3.

:-(

Try to write portable programs.
As I said, it's naughty to try to do arithmetic on booleans.

Agreed. On some systems, TRUE is modelled as "-1".

 

[Martin]

Isn't that a bit cumbersome? Leave out the zeroes (make those cells blank -
it even looks better too!), and then there is a neater formula which you can
use...

Which is...?

Troy didn't say we could change to an easier question :-(

I think he's turned his "F1-Help" key into a shortcut to this NG. Next
thing, he'll copy the whole shooting match to uk.legal :-(

 

[Troy Steadman]

Agreed. On some systems, TRUE is modelled as "-1".

I was going to say the exact opposite, but you are right Mallard Basic
had TRUE=-1 in the dawn of time! I've seen many systems where TRUE=1 and
FALSE=NONTRUE ie any other number.

Which is why I stated the parameters to be used (this being a Excel
question) when I invited Ronald to try his luck (please take note Martin
McSarky). I think most of us have learned something, I have!


--

 

[Martin]

I was going to say the exact opposite, but you are right Mallard Basic
had TRUE=-1 in the dawn of time! I've seen many systems where TRUE=1 and
FALSE=NONTRUE ie any other number.

Which is why I stated the parameters to be used (this being a Excel
question) when I invited Ronald to try his luck (please take note Martin
McSarky).

I am indeed truly humbled and acknowledge without reservation your right -
nay, duty - to highlight my totally unacceptable behaviour, and deliver such
a stinging rebuke and reprimand.

I will endeavour never to deny you are saying something by uttering those
filthy and offensive words "you don't say" ever again. In fact if I do, I'll
report myself to (e-mail address removed) to save you and others here from having so
to do.

Anyway, how did you know I was north of the border? The accent, or the
polar chill running through my every post?

Keep up the good work, and please set us some more excel challenges so we
can feign ignorance and beg you to put us out of our misery by showing how
an entire multinational, multi-currency, multi-lingual, mulit-user
accounting system can be reduced to an excel file stored in just two-bytes,
despite the inclusion of the Polish add-in. Oh - I think I'm going too far
now....

One other thing, your query about my possibly being related to Richard was
totally lost on me. Who he? And why apparently related? I feel you're all
giggling behind your hands at my expense. Perhaps I should get my coat.
But only till tomorrow. Right now it's time for the red plonk ;-)