[GNC] Recording dividend payoffs

Justin Mathew mjustin at protonmail.com
Wed Apr 24 02:15:27 EDT 2019


Hi David and Andrien,

‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐
On Friday, April 19, 2019 5:05 PM, David Cousens <davidcousens at bigpond.com> wrote:

> I certainly prefer the approach of declaring dividends as a contra acunt to
> Retained Earnings and/or debiting it directly to Retained Earnings but it
> will require closure of the books to provide retained earnings to handle it
> properly.

And hence my suggestion to make GnuCash handle such alternate ways too.

> That said there is nothing technically wrong in accounting terms with having
> a dividend expense account which is closed to Retained Earnings. The act of
> closing it to the Retained Earnings subtracts the dividend from Equity in
> this case.

Exactly my point.

‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐
On Friday, April 19, 2019 11:30 PM, Adrien Monteleone <adrien.monteleone at lusfiber.net> wrote:

> I’d suspect, more likely than not, if I were running a business that needed such accounting, I too would close the books each year. It would be nice if GC handled Equity accounts without having to do so

I think we just need to have the right consensus on this matter. Anyway, it is not a release critical feature. So, we have time to reflect on this.

As you rightly mentioned, GnuCash as-it-is can still work for formal business, only that it requires businesses to close the books.

-
Regards,
Justin Mathew
mjustin at protonmail.com

Sent with ProtonMail Secure Email.

‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐
On Friday, April 19, 2019 5:05 PM, David Cousens <davidcousens at bigpond.com> wrote:

> Hi Justin
>
> I certainly prefer the approach of declaring dividends as a contra acunt to
> Retained Earnings and/or debiting it directly to Retained Earnings but it
> will require closure of the books to provide retained earnings to handle it
> properly.
>
> That said there is nothing technically wrong in accounting terms with having
> a dividend expense account which is closed to Retained Earnings. The act of
> closing it to the Retained Earnings subtracts the dividend from Equity in
> this case. The only difficulty is that the procedure is not as clear in
> making it obvious that dividends are paid out of profits.
>
> The problem with how the reports deal with Retained Earnings is another
> issue. Retained Earnings is a permanent account of a business. The net
> income or profit/loss is only a periodic increment or decrement in that
> account value not the value of Retained Earnings itself. GnuCash for the
> reporting must calculate Retained Earnings as Income - Expenses calculated
> from when the since books are opened. If the dividends are accounted for
> with an expense account, then they have been deducted from Retained Earnings
> and hence from Equity. However they will not appear as a line item unless
> listed in the expenses. Depending on tax rules they may or may not be a
> deductible business expense, generally not in most jurisdictions as in most
> cases where dividends are paid out of after tax profits. Specific
> jurisdictional rules could however prevent using expense accounts to record
> dividends.
>
> If I was running a business and using GnuCash, I would be closing the
> Income and Expense accounts to Retained Earnings using the closing procedure
> to zero out the temporary accounts. That way the closing transactions are
> explicit and as long as the Balance Sheet is calculated at a date after the
> transactions for the dividends have been applied they should be reported in
> the balance sheet. Using the contra account should allow you to list them
> explicitly in a Balance Sheet report if you need to.
>
> David Cousens
>
>
> -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
>
> David Cousens
>
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