Recognition to Pay Dividends to Shareholders

Effect on Balance sheet
DR CR
Creditors (+) Retained Earnings (-)

Dividends are considered when the business is generating profit and in our course that happens during Year 3 and Year 4.
 
Original dividends paid:
Original net income:
Dividends payable:

    %
Original values

Balance Sheet Original

ASSETS
Current Assets 1679483
Bank 1618983
Debtors and Prepayments 60500
Other Current Assets (Stock) 0
Fixed Assets 24200
TOTAL Assets 1703683
LIABILITIES
Current Liabilities 588660
Creditors 400000
Accruals 188660
Long Term Liabilities 0
Long Term Loan 0
Equity 1115023
Shareholders' Equity 760383
Income Statement 354640
TOTAL Liabilities + Equity + Retained Earnings 1703683
A. Income
Sale of Licences 3480000
Software Maintenance after Warranty, Recurrent Licencing Fees, Ongoing Technical Support 590000
Unearned income 60500
Currency Gains 0
Cost of Goods Sold (Purchase of Licences for Resale) -2436000
TOTAL INCOME: 1694500
B. Expenses
Software Upgrading 50000
Web Site Development 20000
Web Maintenance 36000
Technical Support 24000
Marketing 36000
Staff Salaries 115200
Consultancy and Accountancy 72000
Office Costs 43200
General Costs 90800
Inventory Expense 264000
Interest on loan 0
Currency Losses 0
TOTAL EXPENDITURE: 751200
Profit (Loss) from Operations
Corporate Tax -188660
Dividends Paid -400000
Net Profit (Loss): 354640
After changes

Balance Sheet New

ASSETS
Current Assets
Bank
Debtors and Prepayments
Other Current Assets (Stock)
Fixed Assets
TOTAL Assets
LIABILITIES
Current Liabilities
Creditors
Accruals
Long Term Liabilities
Long Term Loan
Equity
Shareholders' Equity
Income Statement
TOTAL Liabilities + Equity + Retained Earnings
A. Income
Sale of Licences
Software Maintenance after Warranty, Recurrent Licencing Fees, Ongoing Technical Support
Unearned income
Currency Gains
Cost of Goods Sold (Purchase of Licences for Resale)
TOTAL INCOME:
B. Expenses
Software Upgrading
Web Site Development
Web Maintenance
Technical Support
Marketing
Staff Salaries
Consultancy and Accountancy
Office Costs
General Costs
Inventory Expense
Interest on loan
Currency Losses
TOTAL EXPENDITURE:
Profit (Loss) from Operations
Corporate Tax
Dividends Paid
Net Profit (Loss):