Accounting for dividends

[Maf. King]

On Monday 12 April 2010 05:46:15 Paul A. wrote:

> The thing that makes dividends so tricky is that they are not an expense.
> Treating them as an expense screws up the P&L statement.  Yet you don't
> really want them accumulating in some flavor of an equity account, because
> money paid out in dividends or drawings is not in the business treasury any
> more.
>

Hi Paul,

I record dividends as an expense.  It seems to me that is the closest category 
for what they do - certainly not asset/liability or income, can't see how 
equity would be suitable either - what is your reasoning that makes them not 
an expense?

The assets of the company are reduced when a dividend distribution is made, 
which happens with other (non capital item) expense transactions.  

Yes, I omit them from the calculations for the tax authorities, as they are 
naturally not an "allowable" expense.

HTH,
Maf.