Record dividends (2024)

Sage Business CloudSage Accounting

If your business makes a profit, you can either reinvest it in the business as retained earnings, or you distribute it to shareholders. If you choose to distribute it, it's a dividend. The amount distributed is decided by the board of directors and then agreed on by shareholders. You can record this using journals.

The amount allocated for the dividend, which is part of the appropriation of your profit, should appear on the Profit and Loss report after the net profit amount. This does not show, so we suggest you post the dividend entries to a ledger account in the Equity section of your Balance Sheet report. You also need to post the dividend to a liability account, where it remains until paid.

After you've paid the liability, you can also move the amount from the Balance Sheet report to a profit and loss ledger account. You can do this at any point in your financial year or the end of the year. This ensures the amount on your Balance Sheet report relates to the current financial year only.

To create the dividend ledger accounts

If you have not already done so, to record the proposed dividend, you also need to create additional ledger accounts in the Equity and Current Liability categories.

If you have already done this, proceed to the next section.

Go to Settings, Business settings.
Under Financial Settings, select Chart of accounts.
Select New Ledger Account.

Enter details for the dividend account:

Included in Chart	Leave this selected.
Ledger Name *	Enter a name for the account (for example, "Dividends").
Display Name *	Enter the display name ("for example, "Dividends").
Account Number *	Enter an account number (for example, "3201").
Category *	Choose Equity.
Visibility	Leave the defaults selected.

You have the option to use a different account number, as it's the category that determines where the values appear on your Balance Sheet report.

Click Save.
Click New Ledger Account.

Enter details for the dividend liability account:

Included in Chart	Leave this selected.
Ledger Name*	Enter a name for the account (for example, "Dividend liability").
Display Name*	Enter the display name (for example, "Dividend liability").
Account Number*	Enter an account (for example, "2231").
Category *	Choose Current Liability.
Visibility	Leave the defaults selected.

Click Save.

To record the proposed dividend

Go to Adjustments, Journals.
Click New Journal.
Enter the date and reference information to use for the transaction.
Enter the relevant information to record the proposed dividend. For example:
Ledger Account * Details Debit Credit
Dividends (3201) Proposed dividend 5000.00 0.00
Dividend liability (2231) Proposed dividend 0.00 5000.00
Click Save.

After you have recorded the proposed dividend amount, it appears on your Balance Sheet report as a liability, and the Equity section of the report is updated.

To pay the dividend

Go to Banking.
Select a bank account.
On the New Entry menu, click Expense/Payment.

On the Other Payment tab, enter the following information:

Vendor (optional)	Optionally, select the vendor you are paying.
Paid from Bank Account	Select the bank account you want to pay it from.
Method	Select the payment method.
Date Paid *	Enter the date you are making the payment.
Your Reference (Optional)	If required, enter reference information.
Amount Paid *	Enter the amount of the payment.
Ledger Account	Select Dividend liability (2231).
Details	Enter any additional details for your reference.
Total	Enter the total amount of the payment.

If you are making payments to more than one person, you may want to enter a separate line for each person for your records.

Click Save.

Recording the payment clears the amount from the dividend liability ledger account. The proposed dividend amount shows on the Balance Sheet report.

If you would rather show the payment on a profit and loss ledger account, see the next section.

To move the amount to the profit and loss ledger account

Go to Adjustments, Journals.
Click New Journal.
Enter the date and reference information that you want to use for the transaction.
Enter the relevant information to transfer the dividend. For example:
Ledger Account* Details Debit Credit
Dividends (3201) Dividends 0.00 5000.00
Dividend cost (8900) Dividends 5000.00 0.00
Click Save.