Dividends - do I use the Clearbooks function or just expense payment as employee cost?

Question asked by Oliver Hammerer 7 years ago

Kindly asking for some help please with a question I have regarding dividends.

I paid £9,000 as dividend, which are £10,00 gross. I transferred the £9,000 from the business account to the employee account.

When I import the monthly bank statement I can import the $9,000 and explain them as employee cost.

Should I do that or should I actually use the Dividend function of ClearBooks and enter the £10,000 and do not import the £9,000 from the bank account? Otherwise, what happened to the £1,000 difference from net to gross?

Thank you for your help.

6 Replies

Hi Oliver

I'm wondering if the confusion above has arisen because you are using the Clear Books default Dividend tool, rather than the new beta Dividend tool, available to switch on in "Labs", which is what Kevin is describing above?

The default tool worked by recording an individual dividend to one person in the form of a bill. So you generate a £9,000 dividend, which appears as a dividend payment in the appropriate code and also as an unpaid bill in Purchases. If this is the case then, when you import the bank statement, you should allocate the £9,000 against the unpaid bill from the shareholder, rather than put it to the dividend account which, as you say, merely duplicates the payment.

For lots of reasons the default dividend tool was inadequate and certainly, recording a dividend debt as a supplier bill, unconventional. Consequently we have upgraded the tool, to be switched on in Labs and, in addition to proper legal documentation and procedures, what happens now is as Kevin says above, ie the dividend payment would still show as normal but rather than creating a bill to pay off, the "creditor" (sum owing) is now shown in a special shareholder account code, so when you explain the bank statement you put the money to this code to cancel the debt.

Anyway, on the assumption you haven't switched on the new tool, delete your current explanation of the £9,000 and explain it again, this time allocating it against the unpaid bill.

I hope that helps. Cheers

Hi Oliver

Firstly, the difference of £1k does not go anywhere near the company accounts. That gets dealt with on the shareholders tax return (if they need to file one). As far as the company is concerned, the dividend paid was £9k.

You should then be using the dividend tool which can be found in Purchases > Dividends. It might be a tad fiddly the first time you use it as you'll need to set a few bits up but in return you'll be presented with the proper documentation as follows:

file

I need to clarify a point re where to analyse the subsequent bank payment though as i've just ran this scenario in the demo account and something isn't stacking up right.

I'll get back to you...

Ok, trail of thought clarified...

When processing a dividend via the tool, it will automatically create a new account with the chart called 'Shareholder Name dividend'.

So, when importing your bank statement, this new account is where you'd analyse the payment to as follows:

file

Hope that clears everything up.

Thank you for your response. I initially entered it as Dividend in the software but when I imported the bank account and explained it then I had it twice on the books, which means I was 9000 off.

Therefore I think I can only enter it once, and rather only through the software and not just as employee expense. Just not sure if both solutions are allowed accounting wise.

Thank you.

Hi Oliver

I'm wondering if the confusion above has arisen because you are using the Clear Books default Dividend tool, rather than the new beta Dividend tool, available to switch on in "Labs", which is what Kevin is describing above?

The default tool worked by recording an individual dividend to one person in the form of a bill. So you generate a £9,000 dividend, which appears as a dividend payment in the appropriate code and also as an unpaid bill in Purchases. If this is the case then, when you import the bank statement, you should allocate the £9,000 against the unpaid bill from the shareholder, rather than put it to the dividend account which, as you say, merely duplicates the payment.

For lots of reasons the default dividend tool was inadequate and certainly, recording a dividend debt as a supplier bill, unconventional. Consequently we have upgraded the tool, to be switched on in Labs and, in addition to proper legal documentation and procedures, what happens now is as Kevin says above, ie the dividend payment would still show as normal but rather than creating a bill to pay off, the "creditor" (sum owing) is now shown in a special shareholder account code, so when you explain the bank statement you put the money to this code to cancel the debt.

Anyway, on the assumption you haven't switched on the new tool, delete your current explanation of the £9,000 and explain it again, this time allocating it against the unpaid bill.

I hope that helps. Cheers

Thank you very much. I will delete the bill then and try the new Dividend feature and see how that goes....

You hit the nail on the head. I need help with this too! If you ever need to merge some documents, here is www.AltoMerge.com a really useful tool. Very easy to navigate and use.

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