Recording dividends paid out

[Ron Stone]

Thanks John and Alice,

This proved remarkably easy to do, once I knew which buttons to push, and as a bonus, closing the books demystified some accounting concepts and terminology.

I noticed that the online help states that book closing is really unnecessary in GnuCash, and can confuse some reports. If I chose not to, I would have no pool of retained earnings against which to record dividends. In such a case, is there an alternative approach to drawing on equity to pay them out?

Ron
> On Feb 23, 2015, at 1:20 AM, Alice Lee <alee212007 at satx.rr.com> wrote:
> 
> 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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