Recording dividends paid out

[Ron Stone]

Hi all,

I’ve searched the lists and reviewed the documentation, but I have not found a sufficiently detailed answer to this question, so I’m turning to the accounting gurus for your patient advice to a non-accountant.

Basically, I need to record dividends paid out of a small business. I believe that dividends are payments from after tax retained earnings and not expenses, so I could record them as decreases to equity and increases to liability, and then at the time of payment, as decreases to liability and some asset (presumably bank) account.

If this is correct so far, then my question is about implementation. Specifically, which equity account? All I have under Equity is an Opening Balance account. Is decreasing Opening Balance correct accounting? I don’t have an explicit retained earnings account to debit, and infer from balance reports that it is a value that GnuCash calculates on the fly, as opposed to tracking as an account.

Any advice on what the account map for recording dividends should look like is much appreciated.

Ron