I am a book-keeper for a Ltd Company and we are in year three of business and making a healthy profit.
There are two Director's - they receive a monthly salary payment through PAYE. They have just paid themselves their first ever Dividend payment of £2800 (£1400 each). They have told me that from April they will be receiving a nominal salary each month - covering their tax allowance and NI and the remainder will be by way of Dividend.
My questions are:
1) How do I post the payment through Sage - am assuming it should not appear on the P+L. I will be posting it as a Direct Payment from the bank account but I am unsure which Nominal Code to select?
2) Should the Dividend payment be grossed up at all?
When it comes to posting the bank payment, there are a number of options:
There is an account on the PL for dividends, so you can post it there (down at 8xxx - not on all sages though!)
I personally post it to the directors loan account (a sub code) and then the accountant does a journal at the year end to the Profit and Loss reserve.
If you dont like the sound of that, you can create a code in the 3xxx range and post to there.. that should allow you to view profit more accurately throughout the year
Thank you very much for your reply. I have sat, mulled this over and finally made a decision to create NL code 2303 called Director's Dividend Advance. The Accountant can then easily distinguish it at the end of the year and then use his journal to the P+L reserve :)
