Recording dividends paid out

[John Ralls]

> On Feb 22, 2015, at 1:55 PM, Ron Stone <ronstone at ncf.ca> wrote:
> 
> 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.

I made an Equity:Retained Earnings account. The income and expenses get flushed to there when I close the books each year and I pay dividends out of it to Liabilities:Declared Dividends as you describe.

Regards,
John Ralls