How to record proposed dividends

If your corporation makes a profit, you can either invest the profit back into your business as, or pay it to your shareholders. If you choose to give profits to your shareholders, this is called a dividend. The amount that’s paid, or 'distributed' is decided by your board of directors and then agreed by your shareholders.

Record the dividend payments using journals.

How to record dividends

To make sure the amount allocated for dividends is reported on your Profit and Loss we recommend that you

  • Record the allocated dividends in a two new ledger accounts as equity and a liability. This is reported on your balance sheet and it remains here until the dividend is paid.

  • Once paid, transfer the value from the balance sheet categories to categories on your profit and loss. This is to make sure the value on your Balance Sheet Report only relates to the current financial year.

    You can do this at any point in your financial year or at the year end.

Create the ledger accounts for dividends

We recommend that you create the following categories to record your dividends.

If you’ve already done this, please proceed to the following section.


Category code


VAT rate

Dividend cost








Dividend liability 2231 Current Liability No VAT
  1. From Settings, select More, then choose Business Settings,
  2. Select Chart of Accounts, then New
  3. Enter the details and Save.

Record the allocated dividend amount

When you company has agreed the dividend amount, enter this as a journal. Remember a journal must always have equal debit and credit values.

In our example, we have a allocated dividends of £5000.

  1. From Journals, choose New Journal.
  2. Enter the reference, date and a description if required.
  3. Enter debits and credits in the following way

    Debit Credit Include on VAT return
    Dividends (3201) 5000 0.00 Leave clear
    Dividend liability (2231) 0.00 5000 Leave clear
  4. Select Save.

The allocated dividend appears on your Balance Sheet as a liability and also updates the Equity section of the report.


Record the dividend payments

If you have more than one shareholder, you may need to record multiple payments.

There are a two ways you can do this.

  1. Create a new payment from your bank feed or bank statement import.
  2. Enter a bank payment. If you're using bank feeds or importing from a bank statement, simply match the payment.

In our example, the total dividend payment is £5000.

Using bank feeds or import your bank statement

When you process your imported bank transactions

  1. Select the Dividend Liability from the What drop down list.

  2. Select Create.

Create a manual bank payment

Use this when you don't have a bank feed and don't import your bank statement.

  1. From Banking tab, choose New, then Money In
  2. Enter the details such as the date, total amount paid and a relevant reference.
  3. Enter the amount paid and choose the Dividend Liability . Do not record any VAT.
  4. Select Save.

Once paid, the total value of all your dividend payments will clear the value of Dividend Liability . The value of the proposed divided is still reported on your balance sheet.


Move the dividend value to your profit and loss

The value of allocated dividend is usually reported on your profit and loss.

Once you've paid the dividend, create a journal to move the value from the Dividends to and Dividend on your profit and loss.

If you are not sure how to move this value to your profit and loss, you may want to speak to your accountant about which nominal code to use.