Payment of a Dividend

[Sasso1]

When a Company pays a Dividend to a Director is that payment shown on the P & L account as expenditure OR does this show on the Balance Sheet?

Hopefully there will be an Accountant reading this & clarify my question.

Many thanks

Sasso1

[factor-fiction]

I'm pretty certain it won't appear on the Balance Sheet as that just shows Assets and Liablities.

[EvianBaby]

Dividends do appear on our balance sheets.

[buildersmate]

No doubt Skyline will be alone with a reliable and definitive answer.
This causes me grief as well when I do my own business acounts (I am not an accountant but have some training in management and financial accounting) because the operational P&L shows the net profit after tax for the year, from which any dividend paid to shareholders is made - this then reduces the net shareholders' funds. So it definitely needs to be included within the BS or it won't balance.

[Skyline D]

Thanks for the build up BM.

The answer quite literally is neither. Under current UK accounting legislation dividends paid out (which cannot be "proposed", only "paid") appear in a supplementary note to the accounts which reconciles the reserves figure in the balance sheet. Basically it takes the bottom line "Profit for Year" from the Profit and Loss account and contains all adjustments to arrive at "Retained profits" which is the figure that goes in the balance sheet.

Buildersmate is correct in that it needs to be included or the balance sheet won't balance but the actual figure of the dividend does NOT physically appear in either the Statutory format balance sheet or the Statutory format Profit & Loss Account but in a separate note to the accounts.

I hope that makes sense!