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samisam-yahoo-com
February 7, 2019
Solved

How to treat dividends paid. At the moment they are under ‘expenses’ but that’s not right is it?

  • February 7, 2019
  • 2 replies
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Dividends are an 'equity' type transaction - not an expense.  They can be charged directly to Retained Earnings, but better to create a new equity account for 'dividends paid' and code it there.

2 replies

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Anonymous
Answer
February 7, 2019

Dividends are an 'equity' type transaction - not an expense.  They can be charged directly to Retained Earnings, but better to create a new equity account for 'dividends paid' and code it there.

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arkvalleyinfo
February 7, 2019
how do you add a new equity account for dividends in QuickBooks. I am currently filing all my dividend payments under directors dividends under expenses. can I change this?
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Malcolm Ziman
February 7, 2019

I have seen that dividends are an Income Statement (P&L) item, a reduction of net profit. It only affects equity in that a lower net profit is added to retained earnings in the balance sheet. IMO, It would not be incorrect to post dividends as a below-the-line Other Expense type item

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Anonymous
February 7, 2019
That would result in the correct closing retained earnings, but by my accounting it would not be a correct presentation as it would understate current year net income.
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