Recording dividends paid out

[Alice Lee]

Set up an Equity account called Dividends and debit it when you declare the dividend and credit a liability account as you stated, titled Dividends Payable.  You are also correct about the payment entry:  Debit an asset account, probably your checking account, and debit Dividends Payable.

-----Original Message-----
From: gnucash-user [mailto:gnucash-user-bounces+alee212007=satx.rr.com at gnucash.org] On Behalf Of Ron Stone
Sent: Sunday, February 22, 2015 4:57 PM
To: John Ralls
Cc: gnucash-user at gnucash.org
Subject: Re: Recording dividends paid out

Thank you John,

I’m learning as I go along and not sure what, in practical terms, is involved in flushing income and expenses to retained earnings - but you’ve confirmed that I am on the right track. Can you explain the steps involved in setting up Retained Earnings correctly?

Ron
> On Feb 22, 2015, at 5:31 PM, John Ralls <jralls at ceridwen.us> wrote:
> 
>> 
>> 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

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