06-11-2019, 02:15 PM | #1 |
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Quickbooks and Dividends
Can any accountants or someone familiar with with Quickbooks help with how dividends work in the UK with Quickbooks. With all this Making Tax Digital were dragging ourselves into the modern age finally and setting up Quickbooks. So far so good, and everything is balancing.
The issue i'm having is our accountant has set up a dividend account which is set up as an Expense account. So when our monthly div goes out it shows as an expense rather than profit. The issue i'm having is that it really isn't showing our true profit/loss as it's showing it as an expense (Even though it is going out, it's technically profit). What does the dividend account have to be in the chart of accounts set up as? I'd of thought it has to be along the lines of retained earnings? Any help would be much appreciated |
06-11-2019, 03:18 PM | #2 | |
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Doesn't Quickbooks have a default Dividend account you can chalk it up against? |
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06-11-2019, 03:18 PM | #3 |
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I use Quickbooks Online. My accountant has set the Chart of Accounts to account for dividends as Equity / Partner Distributions.
No issues thus far, and a few years of statutory accounts filed successfully.
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06-11-2019, 03:21 PM | #4 | |
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Thanks, that's helpful. I thought it might be something like this, do you know how move the money out? (As in, Journal entry, transfer or cheque etc.) when you take a div. Or does your accountant do it for you? |
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06-12-2019, 08:37 AM | #5 |
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Dividends paid out should be debited to a capital account from profit reserves and credited to your loan account or bank account if paid direct.
If you’re not issuing monthly dividends then it’s just a payment to your loan account from the bank. The accountants can then enter the dividends when they complete the year end. |
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06-12-2019, 08:43 AM | #6 | |
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The consistent advice has always been salary monthly, dividends quarterly.
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Last edited by Watsey; 06-12-2019 at 08:51 AM.. |
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06-12-2019, 08:48 AM | #7 | |
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06-12-2019, 08:53 AM | #8 | |
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06-12-2019, 11:02 AM | #9 |
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Regardless whether they're monthly or not I still need to account for them I don't see that it makes much difference as you could argue quarterly is the same really.
Anyway, i've changed the expense account that was created by the accountant to an Equity Account under Partnership Distribution. Now i've done that our profit and loss figures seem correct. In the Chart of Accounts in Quickbooks, it's showing the Dividend account as a minus figure now. Is this correct, as it's money that's been taken out? I assume at the year end the accountant would transfer operating profit from the business into this account to bring the figure back up. |
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06-12-2019, 12:57 PM | #10 |
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I would have put dividends under retained earnings as they are a distribution of your profits. Not sure why you have partnership distribution if you're a limited company as this would obviously refer to partnerships.
The point that Watsey was making is how HMRC treat it as salary, which they can then argue should be grossed up with PAYE and NI paid on it. |
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06-12-2019, 01:05 PM | #11 | |
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Also I'd of probably of done it as you said if the accountant hadn't set it up as an Expense account and we've already put 6 months of data in. It was simpler just switching the account to an Equity account rather than have to re do everything. On the subject of regular dividends our accountant has always advised us this is fine. Should a rule come in to alter this he'd advise us, has this changed? I'd of thought since the dividend tax too this isn't as much of an issue.... |
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06-12-2019, 01:15 PM | #12 |
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It's not a new rule with regular dividends been treated as disguised salary by HMRC. This is why you need to be careful to have the dividend vouchers matching the payments if paid direct to you. Otherwise it is better to use directors loan accounts and put dividends in earlier and draw down from them as this also avoids BIK on overdrawn loan accounts.
Tax on dividends is much lower than via a salary hence why HMRC are wary of regular monthly payments of the same amounts. |
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