Home For accounting professionals General accounting discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚

Overdrawn DLA and illegal dividends

imeldabyeimeldabye Well-KnownRegistered Posts: 147
Hi all, I have a ltd company year end 28 June 2012. He had a net profit (after tax) of around £13.5k but paid himself around £15k during the year in Dividends. This was due to shocking lack of paperwork and failing to listen to me telling him that you can only pay dividends on retained earnings rather than what cash he has at the bank at any given time :glare:
He has only provided me with sales figures relating to invoices/jobs that he has been paid for. So if he is able to provide me with some turnover figures (ie invoices raised before year end but not paid) to create a debtors ledger, can I then turn the negative figure on the BS into a positive this way? It is still profit isn't it- so legal dividend rather than illegal?
Or should I show this £1500 as overdrawn loan a/c? To reverse in the next year's accounts. I understand the whole 9 mth CT charge thing, but my question is- a) how will the revenue know when it is reversed if the accounts are done at year end (i.e. 12 months after)- even if I made the entry in the books in 3 months' time this won't be noted on the balance sheet- or is it just in case they come knocking? and b) what is the double entry? is it DR Bank and CR DLA :huh:Sorry if I am being very dense.
thank you


  • RASRAS Well-Known Registered Posts: 124
    Has the company any reserves built up from previous years? Dividends dont have to relate to current years profits only. Any unpaid sales may solve the problem anyway. However, are you sure that he hasnt also given you any supplier payments on a cash basis as well?
  • imeldabyeimeldabye Well-Known Registered Posts: 147
    thanks for posting. No- nothing in the way of reserves b/f and no cash payments to suppliers either. Think I will have to do a DLA and lay the law down for next year. This is a real problem client- he refuses to let me "tidy" his books for accounts prep- giving me summaries of expenses and income generated. :huh:
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    Is there any work in progress you can bring in?
Sign In or Register to comment.