If you create an Equity:Retained Earnings account and debit it, while crediting Dividends Payable (the formal method) does this not show up on the Balance Sheet?
I understand that you would have two ‘Retained Earnings’ lines, one being the actual account and the other being the calculated amount by GnuCash. The sum of the two should be the true amount. This means you can’t submit the report as-is, but you could certainly export to a spreadsheet for the small modification first. Of course, it would be nice if the report factored in an actual Equity:Retained Earnings account to its calculation. There is an alternate practice of using a contra-equity account that is later closed to Retained Earnings called “Dividends Declared” or simply “Dividends”. I don’t see much advantage to it since you still have a liability you can track either way. Regards, Adrien > On Apr 16, 2019, at 9:04 AM, Justin Mathew via gnucash-user > <gnucash-user@gnucash.org> wrote: > > Christopher, > >> The "Retained Earnings" part of the Balance Sheet has nothing to do with >> dividends. >> >> IIUC on the balance sheet date X, the retained earnings simply means the >> total income up to date X, minus total expenses up to date X. > > Don't get me wrong, the 'retained earnings' anywhere in accounting (not just > in the balance sheet) should have everything to do with dividends. It's the > accounting definition that 'Retained earnings' is the business' net income - > cash/stock dividends. > > The definition of 'total income minus total expenses' works only for sole > proprietorships where the business isn't a legal entity in it's own right. A > registered business, however small it is will have at least one shareholder. > Most small businesses will have more than one from what I have seen. > >> From your description of 'owning a company with shares' / 'selling shares of >> company' / 'issuing dividends' I honestly have no idea how the books should >> look like, nor which chart of accounts should apply, nor whether the GnuCash >> reports are appropriate to produce useful reports. > > Oh yes, GnuCash should be able fit in all business, because they all follow > the same accounting principles. All we need to do is to calculate 'Retained > Earnings' as per the standard accounting formula - it should account for > dividends paid. > > Understanding which transactions are dividends to account for is a problem. > > Dividends are a decrease in equity and can't be recorded in an 'Expense' type > account (although that's the current workaround and technically wrong). > Therefore what I suggest is to create a dividend account type under equity > (equity currently has only 1 type of account) which can be used to record > dividend declarations. The value of this account can then be adjusted from > total income. This will give us the real 'Retained Earnings'. > > Note that: The corresponding journal entry for recording in dividend > declaration account is 'dividend payable' (which is a liability account > created by user). To record a dividend paid, a second record is created in > 'dividend payable' against the journal 'current account' or 'cash account'. > > - > Regards, > Justin Mathew _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
