This article describes a few ways to record the receipt of dividends from a share portfolio. There are a number of ways to record these payments, and the options provided may not be suitable for your needs.
This article is provided for guidance only, and might not be suitable for your business requirements. For example, it's suited to Australian businesses and doesn't cover the payout of dividends. If you need clarification or additional information, check with your accounting advisor or post your question below.
Option 1 - Recording cash dividend only
Create an Income Account for receipt of your dividends. You may choose to set it up as an Income (4-xxxx) or Other Income (8-xxxx) account. See our example below.
Enter the receipt of your dividends through Receive Money, allocating the amount to your Dividends account. See our example below.
This method deals with the situation where you want the imputation credit to affect your financial records. When reporting amounts for Pay As You Go Instalments (field T1 on the Business Activity Statement), the amount of the Dividend Imputation Credit is not normally included for calculation, although it is usually included for income tax purposes.
Note: There are exceptions to this treatment. Please seek advice from your accountant or the Australian Taxation Office if you have any queries.
Setup the following accounts:
Franked Dividends (Income)
Dividend Imputation Credit (Income)
Unfranked Dividends (Income)
Dividend Imputation Credits (Asset)
Assuming a cash dividend of $100.00 was received with $50 franked, $50 unfranked and an imputation credit of $28.12, the deposit would appear as shown below.
The credit of $28.12 is credited to the asset account to be offset against future tax liabilities.
Option 2b - Recording dividend imputation credits with no financial effect
The Inventory module can be used to help you keep track of your Imputation Credits, where they are deemed to have no effect on your financial records.
Three inventory items need to be created, all of them with the option "I sell" selected:
Item 1: Dividend Income
Item 2: Imputation Credit
Item 3: Imputation Adjustment
The linked income account for all three items needs to be to your Dividend Income Account. See our example below.
Once the items are set up:
Create an item type sales invoice from the Sales command centre.
Fill in the customer name as being a Cash Customer or you can have the company you are receiving the Dividends from set up as a customer.
Complete the invoice as shown in the example below.
This Sale will create the following Journal Entry:
Debit Trade Debtors $100.00
Debit Dividend Income $ 56.25
Credit Dividend Income $156.25
Note: The receipt can be deposited into the bank either by completing the 'paid today' field, or going to Sales and using Receive Payments. This increases your dividend income by the dividend received, and negates any financial effect in recording the Imputation Credit.
To find out how many and the value of any imputation credits, the Item Sales Detail report can be used as follows:
Go to the Reports menu and choose Index to Reports.
Click the Sales tab.
Click the Item Sales Detail report.
[AccountRight v19 (and earlier) and AccountEdge only]Click Customise.
Enter the date range required and the item number used for the Imputation Credit item above.
A sample report is shown below.
Accounting for new shares purchased as part of a Dividend Reinvestment Plan
Create a new inventory item: In our example S-MYO-151201
Setup a Contra asset account, making sure that it is a Detail account with the Account Type set to Bank as shown in the following example:
Record the receipt of the dividends as detailed in one of the options listed above, making sure the funds are deposited into the Contra account as shown in the following example.
Complete a purchase bill to buy the new shares as part of the Dividend Reinvestment Plan.
Enter the payment for these shares through Supplier Payments, ensuring the Contra account is selected. The balance of the contra account should now be zero.