Typical Transaction 25
Example: Adjust for dividends for shareholders End of Year Four. Dividends to be paid at the rate of 40% of profits= 354,640 * 0.40 = 141,856
The entries for this transaction in the Accounting System can be seen here, in the AccountingLab and in the Accounting System, Operation O146E, Y4:
| Recognition of Dividends Payment | Increase in Creditors (+) |
|---|---|
| Decrease in Retained Earnings (-) |
> Credit entry Creditors increased by 154,340 (+)
> Debit entry Retained Earnings, decreased by 154,340 (-)
> Values in red show Balance Sheet values before and after changes
> Debit entry Retained Earnings, decreased by 154,340 (-)
> Values in red show Balance Sheet values before and after changes
| Balance Sheet | ||
|---|---|---|
| Original | After Changes | |
| Assets | ||
| Current Assets | 1’679,483 | 1’679,483 |
| Bank | 1’618,983 | 1’618,983 |
| Debtors and Prepayments | 60,500 | 60,500 |
| Other Current Assets (Stock) | 0 | 0 |
| Fixed Assets | 24,200 | 24,200 |
| TOTAL ASSETS | 1’703,683 | 1’703,683 |
| Liabilities | ||
| Current Liabilities | 588,660 | 730,516 |
| Creditors | 400,000 | 554,340 |
| Accruals | 188,660 | 188,660 |
| Long Term Liabilities | 0 | 0 |
| Long Term Loan | 0 | 0 |
| Equity | 1’115,023 | 973,167 |
| Shareholders’ Equity | 760,383 | 760,383 |
| Income Statement | 354,640 | 212,784 |
| TOTAL Liabilities + Equity + Retained Earnings | 1’703,683 | 1’703,683 |