[GNC] Recording dividend payoffs

[Justin Mathew]

David,

Thanks for joining the conversation.

> If you make the Dividends Declared account a child account of Retained
> Earnings ,i.e a contra account in accounting terms, any dividend amounts
> will be automatically deducted from Retained Earnings as suggested on the
> following site.
> https://www.accountingcoach.com/blog/recording-dividend-payment.

It does, except on GnuCash. Because GnuCash calculates Retained Earnings as Total income - Total Expense (which is nothing but net income). See attached screenshots.

> They also
> describe an alternative approach using an Expense: Divdends Declared to
> record the declaration and this is closed to Retained Earnings at EoY
> achieving the result you were after.

This is not technically right. Dividends aren't Expenses. Recording dividends as Expenses do not decrease the Equity. Dividend payoffs should decrease equity.

-
Regards,
Justin Mathew
mjustin at protonmail.com

Sent with ProtonMail Secure Email.

‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐
On Wednesday, April 17, 2019 1:35 PM, David Cousens <davidcousens at bigpond.com> wrote:

> Justin,
>
> If you make the Dividends Declared account a child account of Retained
> Earnings ,i.e a contra account in accounting terms, any dividend amounts
> will be automatically deducted from Retained Earnings as suggested on the
> following site.
> https://www.accountingcoach.com/blog/recording-dividend-payment. They also
> describe an alternative approach using an Expense: Divdends Declared to
> record the declaration and this is closed to Retained Earnings at EoY
> achieving the result you were after.
>
> David Cousens
>
>
> ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
>
> David Cousens
>
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