Here's how to post journal entries to create a dividend in FreeAgent.
Why would I do this?
This is important because sometimes the company will declare a dividend that won't be physically paid out of its bank account. The money will usually then go into your loan account, as it's money that the company owes you and should pay you at some date.
How to post a dividend journal
To create a dividend journal, start by going to Journal Entries on the Accounting menu.
Click the New Journal Entry button. If you can't see this button, then you don't have access to post journals, and you'll need to talk to your accountant, or whoever set you up as a FreeAgent user, to ask them for access.
The New Journal Entry screen appears.
Choose code 908 Dividend, from the bottom of the code list.
The Users drop-down menu appears when you select the Dividends code.
Choose the user to whom the dividend was paid. If your company has more than one shareholder, you'll need to post each shareholder's dividend individually as a separate journal entry. Any shareholders who are receiving dividends need to be set up as shareholders, or employees, or directors in the Users area.
Put in the date on which the dividend was declared. This is important not only for the company accounts, but because dividends form part of your own personal income and must go on your Tax Return for the correct tax year.
Enter the amount of the dividend that was declared for this user.
Put a description in, something along the lines of "Dividend declared".
Click Create and Add Another, because for every journal entry you post there must be an equal and opposite entry. FreeAgent will automatically set the date the same as the previous entry, and it will put in the same amount but as a minus. This is very important to make the two journal entries match. It will also put in an identical description.
For the opposite entry, choose 907 Director's Loan Account, and choose the same user as you posted the dividend entry to.
Those are the required journal entries for the first shareholder's dividend. If you're the only shareholder in your company, then that's it and you can click Create New Entry and finish there. If you have more than one shareholder who is being paid a dividend, then you need to click Create and Add Another, and do the two journal entries again - dividend and opposite entry to the loan account - for each shareholder.
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