Incorporation - Paying owner

Question

Hi everyone, 
 
 Another newbie question from a non-accounting person. 
 
 I'm a one man show incorporation and I need to pay myself. In other words, since |I am not an salaried employee, take dividends from the income the corporation generates. 
 
 I have created myself as a supplier as per the SAGE's Help section BUT, what account do I record the transaction against when cutting the check? When SAGE's help section says to put the expense against equity, that makes sense to me but, I don't see any account listed for dividends in the Equity section (3000) nor anything in the Expense section (5000) for dividends paid out. 
 I do however have 5 User-Defined expense accounts listed in the Payroll Expense section (5400). Is it just a matter of renaming one of those and using it? Since I am not a salaried employee, that doesn't seem like the right way to go to me. Am I wrong? 
 
 Thanks in advance to all who reply. 
 
 Cheers, 
 
 Marc

Smith and Co · Accepted Answer

You are correct in that you do not use the User-Defined Expense since those are for employees and you are not an employee. 
 Dividends needs to be declared first by lawyer and usually this is discussed between yourself and your accountant who then passes the instruction to lawyer to declare the dividends. You should have an account under Current Liabilities called Shareholder's Withdrawals. If not then create one and use that account. instead. Your accountant can then make an adjustment to divert some or all into dividends at year-end depending on the financial situation at that time.

Keith L · Answer

Hi MarcDu, 
 You may want to follow the link below for how to record a dividend payment to stockholders as you mention that your company is an Corporation. 
 How do you record a dividend payment to stockholders? 
 http://www.accountingcoach.com/blog/recording-dividend-payment 
 Hope this helps

MarcDu · Answer

Thank-you Keith. That helps. I also like the site's name. If it holds true to its name, it will help me quite a bit. 
 Cheers, 
 Marc

Smith and Co · Answer

Dividends are declared based on previous years - not current year.You are best to still create and use a 2000 liability account called Shareholder Draw. That can later be cleared to a dividend payable account when the dividends are declared by lawyer at fiscal year end which at that point will show in the equity account that is related to dividends. You cannot post to a Retained Earnings account as it is not a postable account. When seeking accounting information on the internet be sure the website is for Canadian content as Canada has different requirements/rules than USA or other countries. 
 You may wish to consult an experienced bookkeeper in your area to oversee your work periodically to ensure correct postings. 
 For now I would suggest you enter in A/P purchase module as a pay now under your name and code to a 2000 account called Shareholder's Draw.

JSB · Answer

That would be current liabilities, as you would need to clear that account before closing your year, by assigning it to either Dividends, wages, or Loan. (loans have other implications).

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