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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am doing some bookkeeping for a limited company and want

Customer Question

I am doing some bookkeeping for a limited company and want to show a distribution of profits to the directors partly repayment of capital invested and partly a dividend can you advise the postings i need to make
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
I would first move the profits from whence they are now recorded into a new ledger heading 'Distribution Reserve.'
From thence distributions may be made, but here we meet a snag upon which I need information before I can advise you. Where is the capital invested to which you refer in your question? is it for example in shares in the company or under some other ledger heading like say loans to the company?
Customer: replied 2 years ago.

it is in the form of a loan to the company ie represents the money invested by the directors originally which the company can now pay back

Expert:  bigduckontax replied 2 years ago.
SORRY, i am confusing myself! Forget the Distribution Reserve ledger heading.
To repay Directors' Loans just Credit Cash/Bank Debit Directors' Loans [as appropriate]. This will reflect in the Balance Sheet in the final accounts for the year.
To Pay dividends Credit Cash Debit Dividends paid. This will then go through the Profit and Loss Account in the final accounts as an exceptional item as you must be careful not to include it within the Corporation Tax computation.
Classically the cash would first have been transferred to s Dividend Cash Account against which warrants would have been issued, but that is really for large companies where there is a danger of un-cashed warrants sculling about the accounts at the year end.
I do hope I have assisted you with your question.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your excellent support.
I did look this up in Vickery's Book Keeping and Accounts text book and nearly got myself into a right fankel as they would say up here North of the Border where I reside!

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