Dividend Liability and Dividend Payment Process in Zumzum Financials

Zumzum Financials Knowledge Base

    How to Record a Dividend Liability and Dividend Payment in Zumzum Financials

    Once your board of directors has decided and agreed your Dividends amount and agreed that with your shareholders, you will be ready to record the transaction in Zumzum Financials.

    Although Dividends  should appear on the Profit and Loss report, after the net profit figure, Zumzum Financials does not support this capability.

    Dividend entries in Zumzum Financials should be posted to nominal codes in the Capital and Reserve and and a Liability sections of the Balance Sheet report.  The Dividend will remain on the Balance Sheet report until it is paid.

    We recommend the dividend value in the Capital and Reserve section of the Balance Sheet report be moved to the Retained Earnings/Profit nominal code.

    1. Create the dividend nominal codes in your chart of accounts.

    Before you record dividends in Zumzum Financials, you should create the required nominal codes.

    If you already have the following nominal codes in your chart of accounts, then you may move the next sections, otherwise, you should create new nominal codes. Please consult with your accounting to confirm if you need to create new nominal codes.

    Follow the steps in article on how to create a new Nominal Account to add your new nominal codes. 

    If you are using the Zumzum Financials default chart of accounts,  we suggest you use the following nominal codes:

    Type Nominal Category Sub Category Nominal account Name Nominal Account Code
    Balance Sheet Capital & Reserves Reserves Dividends 3201
    Balance Sheet Current Liabilities Creditors: Short Term Dividend Liability 2290

     

    Once you have completed this step and have all the necessary nominal codes, please proceed to the next step.

    2. Record the proposed dividend as a manual journal entry.

    Once you have decided on your dividend amount, you should record this in Zumzum Financials. When your manual journal entry is posted, the value appears on the Liability and Capital and Reserves section of your balance sheet report.

    Below is an example of the proposed dividend journal entry using the value of 10000.

    N/C Name Details VAT Debit Credit
    3201 Dividends Dividend 2016 YE No Vat 10000.00
    2290 Dividend Liability Dividend 2016 YE No VAT 10000.00

     

    Once you have posted your journal entry for the amount of dividend to be paid, please review your Trial Balance and Balance Sheet to confirm the results are as you expected.

    You are now ready to proceed to the stage of paying your dividend. .

    3. Pay the dividend with a Bank Payment transaction

    Once you are ready to pay the dividend, you should to post a Bank Payment transaction to the Dividend Liability nominal code. This transaction will reduce the balance of the bank account and also the balance of the Dividend Liability nominal code.

    Below is an example of you paying a dividend of 10000.

    Bank Date N/C Details Net T/C Tax
    1200 Payment date 2290 Payment of dividend 10000.00 T9 0.00

     

    Once you have posted your Bank Payment, please review your Bank Account Balance, Trail Balance and Balance sheet reports to confirm the outcome is as you expected.

    The Balance of the Dividend Liability account should now be zero.   

    4. Manually journal the value from the Dividend nominal account to your Retained Earnings/Profit nominal code.

    If you review your Balance Sheet report, the balance remains on the Dividend nominal code (e.g. 3201).  You may wish to transfer the balance from the Dividend nominal account to your Retained Earning/Profit nominal account on your Balance Sheet. You should post this transaction on the date of the start if the new fiscal year to ensure the Dividends balance balance only relates to the new fiscal year.  

    N/C Name Details VAT Debit Credit
    3200 Retained Earnings/Profit Dividend 2016 YE No Vat 10000.00
    3201 Dividends Dividend 2016 YE No VAT 10000.00

     

    You have now successfully completed the process of manually transferring the balance of the Dividend nominal code to the Retained Earning/Profit nominal code. Please review your Balance Sheet report to confirm your outcome is as expected.

     

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