Dividends

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in General accounting discussion
Hi

I am doing the bookkeeping for a Limited Company, where the Director has been part of his dividend. I haven't been given the opening balances by the Accountant, so do not have an entry to post against.

I am using Sage, should I post the payment to Undistributed Reserves, or do I need to set up a Dividends account?

Sue

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    I take it you mean hes been paid part of his dividend or hes just taking money and calling it dividends.

    In any case the entries are:

    Dr: Directors Account
    Cr: Bank (I assume)

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    Are you paying them net or gross? I calculate the gross value, pay the net and then post the difference (which is their personal tax liability) to the balance sheet.

    When the tax becomes due, I already have it saved up for them. It works similar to a directors loan account. 8)
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    I'm not sure whether it's net or gross, I don't have contact with their Accountant.

    I would guess then from what you are saying that I should set up a Dividends account within the Capital and Reserves Category?
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    I don't use Sage, but that sounds OK. I use mine as a control account which can be reconciled as necessary and keeps a track of the dividend certificates etc.

    Because I have to do monthly ones, this works best for me.

    I set up a spreadsheet for each shareholder and this is linked to the overall account which I then reconcile to my BS. This allows me to change the amount of dividend with regards to shareholding by just changing one or two entries.

    This covers everything I need - company requirements for the accounts and personal tax for the shareholders.

    8)
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    Ok thanks for your help.

    I would guess their Accountant will deal with the reconciliation at the end of the year, it's just that he didnt want to deal with the day to day bookkeeping and suggested they found someone else!
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    It might be worth contacting their accountant and asking how he/she wants the information presented.

    Especially if they are going to be doing the reconcilliations and drawing up the final accounts.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    Hi

    The problem is there isnt a link between me and their Accountant, so I'm not authorised to speak to them.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    Maybe if you explained to your client that it would ultimatley save them money if you could liaise direct over certain matters, they may authorise you to contact them.

    8)
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    How much time wasted!

    When you set up a set of statutory accounts the software package will give you a directors account also could be classified as directors loan.

    NCD are deemed to be paid net of tax so you dont need to keep any balance sheet entries :? To start with as mentioned they are the directors personal tax therefore shouldn't show anywhere in the company accounts!

    If you are bookkeeping for the company, you will get the end records i.e a cheque book saying "dividend payment" all you need to do is my double entry shown earlier.

    Give the journal a proper description and at year end you review the nominal account and you can easily see what you need to put on the directors personal tax return.

    There are other issues regarding the directors account but I wont bother you with them, there accountants will worry about that.

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    If you can't speak to their accountant then I would suggest doing Deans posting, this is what I would do.

    If anything is said at the year end then maybe next time the client will give you the authorisations necessary.

    After all you don't have a crystal ball, although I think some clients believe you do or have the ability to communicate telepathically :)

    Michelle

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    Hi everyone

    Thanks for your advice.

    I have set up a Directors account as there wasnt one set up automatically in the bookkeeping software and posted the cheque to it for the Accountants to deal with at year end.

    Sue
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dividends

    Just as a thing for you to watch out for as well, all personal items for the director go to this account to.

    Regards

    Dean

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