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What nominal code do I use in Sage for Dividends

You don't have a code, you have 2!

In a typical scenario a dividend is proposed and then at some later date paid quite possibly in the next financial year.

To account for this we have a Proposed Dividend account and a Dividend Liability Account.

The dividend liability account acts as a control account to ensure that when all the shareholders have been paid their individual dividends, the whole amount has been used and that there have been no duplicated or missed payments. Your situation may be much more simple than this but understanding the complex situation explains why we do it this way.

The Dividend Liability Account you might expect to be the same area as the other control accounts on monies the companies owes such as VAT/PAYE/NI/Wages. However, this is owed outside the financial year so typically is is put in the 23XX section 2340 is a popular choice.

The Proposed Dividend account is next to the Reserves account 3210 is a popular choice, typically this is moved into the main P&L 3200 at year end.

The process comprises of a journal to set up the liability, then one or more bank payments to clear the liability and then a journal to deduct the dividends from the retained profit and loss.

1/ Journal - Credit Liability (2340) - Debit Proposed Dividend (3210)

2/ Make payments from the bank account* of your choice and check the Liability account is zero and that all payments have been made and non duplicated.

3/ At year end Journal - Credit Proposed Dividend (3210) Debit Retained earnings / P&L (3200)

* You might not actually pay all dividends, some owner/directors may offset borrowings during the year in their directors loan accounts against the dividend, if this is the case

2b/ Journal - Credit Directors Loan Account (1120) - Debit Liability Account (2340)