Dividend Accruals

Related Topics

For more information about accounting, see Accounting.

Dividends paying to the expense GL account quarterly

1st Month

  • Complete a journal voucher entry to debit the expense GL and credit the payable GL for the accrued dividend figure on the 210/215 Reports.
  • Complete a journal voucher entry to credit the expense GL and debit the payable GL to reverse the journal voucher entry.

2nd Month

  • Same entries as the first month.

3rd Month

  • No entries need to be made this month because the dividends are paid out.

Dividends paying to a payable GL account quarterly

1st Month

  • Complete a journal voucher entry to debit the expense GL and credit the payable GL for the accrued figure on the 210/215 Reports.
  • Complete a journal voucher entry to credit the expense GL and debit the payable GL to reverse the journal voucher entry.

2nd Month

  • Same as the first month.

3rd Month

  • Use the dividend paid column on the 210/215 Reports to make the journal voucher entry debiting the expense GL and crediting the payable GL. This time do not reverse the entry.

Accruals

Accruals are dividends owed but not paid. Accrual accounting allows you to even out expenses throughout the period to create a more accurate financial picture. There are several methods for accruing dividends. The following example describes procedures involved in the most common method of accrual performed after month-end processing.

  1. After January month end, you receive the Accrued Dividends Payable Report 210. The 210 Report provides January's accrued dividends as of January 31, including dividends actually paid at month end and excluding dividends paid during the month. Dividends paid by the Share Rate Change window or maturing certificates will be excluded. The 210 Report contains the total amount to accrue by share type.
  2. In February, complete the Basic Journal Voucher window with an effective date of January 31 to post January's accrued dividend amount of $25,000:
    1. Debit Dividends Expense 380000: 25,000.00
    2. Credit Dividends Payable 820000: 25,000.00
  3. Complete the Basic Journal Voucher window with an effective date of February 1 to reverse January's accrual amount:
    1. Debit Dividends Payable 820000: 25,000.00
    2. Credit Dividend Expense 380000: 25,000.00
  4. Run the Statement of Condition Report 290 and Statement of Income and Expense Report 300 on a credit union-determined date. By this date, you should have made all adjusting entries.
  5. After one back-office cycle, the financial reports are available online via the Short Reports - Non-Critical window. The reports display the effects of your entries with a debit in 380000 and a credit in 820000 of $25,000.
  6. February month end produces another dividend accrual amount. The 210 Report provides two months of dividends: January and February for $50,000. Complete the Basic Journal Voucher window in March with an effective date of February 28 to post the amount:
    1. Debit Dividend Expense 380000: 50,000.00
    2. Credit Dividends Payable 820000: 50,000.00
  7. Complete the Basic Journal Voucher window with an effective date of March 1 to reverse February's accrual amount:
    1. Debit Dividends Payable 820000: 50,000.00
    2. Credit Dividend Expense 380000: 50,000.00
  8. On March 31, Portico pays a dividend of $75,000 for the quarter and posts it to 380000. The dividend of $75,000 appears on the 210 Report.

Accruals are considered as dividends owed but not paid, or, in reference to loan income, interest earned, but not collected. Accrual accounting is optional, and is performed to distribute expenses throughout the period to create a more accurate financial picture.

Certificates

Certificate accruals are handled in much the same way as dividend accruals. Do not be confused by the dividend payment date of the certificate The dividends accrued are posted and reversed with a journal voucher entry each month, taking the figure from the 210 Report, as is done with the share accounts. When the certificate pays a dividend, whether it is at intervals during the life of the certificate or at maturity, the paid amount is excluded from the journal voucher entry posting as is performed with the share dividend. A reversal is completed for the prior month's posted amount. Remember, the 210 Report will only include the dividends actually paid at month-end, excluding dividends paid during the month, as for matured certificates.

Paying Dividends from the Payable General Ledger

It is suggested that dividends should be paid from the expense GL 380000, and not from the payable GL 820000, which should be used only as a "wash" account. Paying the dividend from the payable GL causes the last dividend accrued to be excluded from the total dividend expense figure. The credit union will have to make an extra entry to move the dividend amount from the payable GL 820000 to the expense GL 380-000 in order for the proper expense amount to be reflected on the income statement. However, Portico will designate whatever general ledger the credit union wants to pay dividends from on the share processing rules.