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Profit and Loss Summary
Hi there, my company year end is the 31st July. I paid a dividend on the 3rd August 2007 based on profits for the previous quarter in the 2006/2007 accounting year. This dividend payment is showing on the Profit and Loss Summary for the year 2007/2008, so is affecting the calculation, as it was based on earnings in the previous accounting year. Should the profit from the previous year be included on the P&L Summary, or can this dividend be excluded in the calculations for the 2007/2008 accounting year?
Any assistance would be greatly appreciated. I hope this makes sense!
Kind Regards,
Tim Ross
Any assistance would be greatly appreciated. I hope this makes sense!
Kind Regards,
Tim Ross
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Inappropriate?Tim,
Yes, for simplicity we assume the dividend paid is related to the accounting period it's in.
What you need to do is add a manual bank entry (or explain an existing transaction) as that dividend (Money Paid to User > Dividend), on the last day of 2006/7.
Add another entry on that day (or another explanation) which credits the Director's Loan Account for the same amount (Money Received from User > Payment to Director Loan Account).
These balance out to zero as far as your bank statement is concerned.
Your 3rd August entry is just a withdrawal from that account, (Money Paid to User > Payment from Director Loan Account) bringing the Director's Loan account back to where it was.
In fact, this accurately reflects what occurred - your dividend was credited to you as a director at the end that year, you just didn't withdraw it at the time.
Hope this works for you.
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this answers the question
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Inappropriate?When did you declare the dividend and more importantly what date is on the minutes & dividend vouchers?
If it was 31 July or before follow Ed's advice.
If it was 1 August onwards you must not backdate the dividend payment into last year. It's ILLEGAL! Leave it as it is. If your loan account was overdrawn at the Y/E your accountant will do the necessary entries on the corporation tax return to take account of the dividend and reduce the overdrawn balance.
I’m optimistic
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this answers the question
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Inappropriate?Thanks guys. I declared the dividend for July 31st, but paid it a few days later. I will check with my accountant, but thank you for the helpful advise.
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Inappropriate?@Stuart - is a related problem that we're not carrying forward Retained Profit in the P&L, so it makes it look like a 3rd Aug dividend unpayable? Should we be?
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Inappropriate?You should be carrying forward retained profit to allow a correct dividend calculation. This follows on from my comments about year end adjustments. Perhaps we need to talk about this or even meet and discuss it.
Let me know what you think.
I’m confident
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Inappropriate?Stuart - it would be good to chat anyway to hear your views on what we're doing. In person would be even better (google maps says I'm 2 1/2 hours away...).
Maybe you could drop me a line (ed at freeagentcentral dot co dot uk).
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