Business: accounting for dividends

[Jeremy Miller]

>
> > Maf. King wrote:
> > > Isn't a didvidend payment recorded as a (post-tax) expense?
> > > On the grounds that it is money being taken out of the business.
>

Not exactly.  Dividends is a temporary equity account that is also closed at
the end of the year.  So you'll want to do something like this:

12/31 (or date dividends are declared if earlier)
Dividends                  10000
   Dividends Payable - Joe             2000
   Dividends Payable - Susan         3000
   Dividends Payable - William       5000

12/31 (or date of closing)
Retained Earnings      10000
   Dividends                           10000

The process of closing typically goes:

Close income and expense accounts to Income Summary
Close Income Summary to Retained Earnings
Close Dividends to Retained Earnings

Once you close Dividends to Retained Earnings by debiting R.E. and crediting
Dividends, you should be good to go.

Cheers,
Jeremy