Similar to last one on posting payroll, I need some guidance on bookkeeping practice for posting an interim or full year dividend.
The Chart of Accounts structure currently has a "Dividends" code, but as an expense and if we post the dividend paid directly to this account it would reduce profits before tax and thereby muck up calculation for tax in that year.
I have been advised that we could/should create a nominal under Capital/Reserves/Equity for Dividends and post these there, as this won't affect the profit calculation, but wondered if anyone here could comment on how you would go about this?
Thanks
Ridesy
-- Edited by Ridesy on Friday 21st of January 2011 03:12:06 PM
Assuming it's the debit entry (credit would be either bank if paid, or DLA if not), we tend to use N/L code 3295, which shows up in the capital and reserves section, but doesn't affect the P&L.
You then need to make sure the 'Capital and Reserves' section of the chart of accounts picks it up.
