Introduction
As part of the year-end workflow, users may pay dividends for companies. Once processed, system journals are posted automatically to account for the dividends including the franked amounts attached, without the need for users to create these transactions.
The System Journals posted depend on the profit/loss scenarios. To locate the system journals, navigate to the Transaction List and enter keywords in the search bar. Ensure the System Journal filter is selected as per below:
To explain the system journals posted, we will use the following example:
A company with two shareholders, made a net profit last year, with $10,000 unallocated, held in Retained Earnings. In the current year, the company made a profit of $5,000.
Therefore, the earnings available for distribution is $15,000 ($10,000 + $5000).
The system will also pick up the Franking Credits available, based on the transactions posted for the period.
In this example, the entire current year profit of $5000 will be distributed to the two shareholders.
Once processed, system journals will be automatically created in the transaction list as at the end of the period.
Where profits are distributed solely from current-year profits, the following journals will be posted automatically based on the Dividend Percentage:
| Dr. 49550 Dividends Paid/Shareholder Sub-Account |
| Cr. 80870 Dividends Payable/Shareholder Sub-Account |
Note: Where the current-year profit is fully distributed, no journals will be posted to the Retained Earnings account.
In this example, only $3000 of the current-year profit will be distributed.
Once processed, system journals will be automatically created in the transaction list as at the end of the period.
Where profits are distributed solely from the current-year profits, the following journals will be posted automatically based on the Dividends Percentage:
| Dr. 49550 Dividends Paid/Shareholder Sub-Account |
| Cr. 80870 Dividends Payable/Shareholder Sub-Account |
The system will also post the outstanding amount to the following journals, to carry forward any undistributed amounts to Retained Earnings.
| Dr. 49000/Profit Allocation Account |
| Cr. 58500 Retained Earnings |
In this example, the entire earnings available for distribution of $15,000 will be allocated, which includes the current-year profit of $5000, and $10,000 held in Retained Earnings.
Once processed, system journals will be automatically created in the transaction list at the end of the financial period.
Where profits are distributed solely from the current-year profits, the following journals will be posted automatically based on the Dividends Percentage:
| Dr. 49550 Dividends Paid/Shareholder Sub-Account |
| Cr. 80870 Dividends Payable/Shareholder Sub-Account |
The system will also post the below journals for the amounts that have been distributed from Retained Earnings as per the Dividends Percentage:
| Dr. 58540 Retained Earnings |
| Cr. 49000 Profit/Loss Allocation |
| Dr. 49550 Dividends Paid/Shareholder Sub-Account |
| Cr. 80870 Dividends Payable/Shareholder Sub-Account |
To explain the system journals posted, we will use the following example:
A company with 2 shareholders made a net profit last year, with $10,000 unallocated, held in Retained Earnings. In the current year, the company made a loss of $5,000.
Therefore, the earnings available for distribution is $5,000 ($10,000 - $5,000).
Enter the Dividend Percentage/Amount. Once processed, system journals will be automatically created in the transaction list as at the end of the financial period.
To account for the current-year loss, the following journals will be posted automatically:
|
Dr. 58500 Retained Earnings |
|
Cr. 49000 Profit/Loss Allocation |
The system will also post the below journals for the amounts that have been distributed from Retained Earnings based on the Dividend Percentage:
| Dr. 58540 Retained Earnings |
| Cr. 49000 Profit/Loss Allocation |
| Dr. 49550 Dividends Paid/Shareholder Sub-Account |
| Cr. 80870 Dividends Payable/Shareholder Sub-Account |
If the company has made a current-year loss, that is greater than the retained earnings (if any). The Dividend Percentage/Amount field will be greyed out and displayed as $0, as there are no earnings available for distribution to the shareholders.
In this example, the company made a current year loss of $5000, and has no retained earnings, leading to a net loss of $5,000
Users will be unable to enter the Dividend Percentage/Amount fields. Once processed, system journals will be automatically created in the transaction list as at the end of the financial period to account for the current year loss.
|
Dr. 58500 Retained Earnings |
|
Cr. 49000 Profit/Loss Allocation |
Franked Percentage - More Details Panel
The franked percentage entered from the Pay Dividends screen will automatically populate the more details panel of the system journal 49550 - Dividends Paid/subaccount
This information will also be reflected in the Franking Account Worksheet.
Frequently Asked Questions
1. There are no shareholders in the Company. What system journals will be processed?
In this case, the system will simply account for the current year profit/loss by posting to Retained Earnings:
|
Current Year Profit |
Current Year Loss |
|
Cr. 58500 Retained Earnings Dr. 49000 Profit/Loss Allocation |
Dr. 58500 Retained Earnings Cr. 49000 Profit/Loss Allocation |
2. How do I reprocess the locked system journals posted?
To update the distribution, return to the Pay Dividends tab in Period Compliance.
Users are able to update the dividend details on screen.
Once clicking
the system journals will be re-posted accordingly.
To remove all system journals posted from the Pay Dividends screen for the current financial year, select Reverse FY 20XX System Dividends on top of the screen
Alternatively, select Reverse Period from the Period Compliance screen to reset the selected financial year.
- Note: This will reverse any other changes entered in the Year-End process including reserve amounts entered in the Calculate Taxable Income screen.