Revenue Expense Gain Loss Dividend And Withdrawal Accounts

There are four components of the financial statements the following table shows how dividends appear in or impact each one of these statements if at all.

Revenue expense gain loss dividend and withdrawal accounts. A dividend is not an expense to the paying company but rather a distribution of its retained earnings. The extended accounting equation is the basic accounting equation with the owner s equity section broken down into three more categories of accounts. Also setup an other income type and other expense type accounts called gain on investments and loss on investments respectively. The dividends are not considered as an expense in the income statement due to the following reasons.

Gains losses vs. Revenue expenses and dividends. Dividends are the distribution of profits to the shareholders as a return on their investments. Most companies report such items as revenues gains expenses and losses on their income statements though some of the terms will sound.

Close all dividend or withdrawal accounts. Each month do a general journal entry similar to this to record your income. The closing process reduces revenue expense and dividends account balances temporary accounts to zero so they are ready to receive data for the next accounting period. Journal for transfer of dividend and ddt to profit and loss appropriation account.

Net profit after tax. In a t account their balances will be on the left side. All expense accounts are then closed to the income summary account by crediting the expense accounts and debiting income summary. A dividend is a distribution made to shareholders that is proportional to the number of shares owned.

Dividends are paid out of the net profits or accumulated reserves of the company which are calculated after deducting all the expenses and paying the corporate income taxes as per the regulatory laws. These account balances do not roll over into the next period after closing. Remember that all revenue sales income and gain accounts are closed in this entry. To illustrate an expense let s assume that on june 1 your company paid 800 to the landlord for the june rent.

Profit and loss a c dr. Close all expense and loss accounts. Dividend distribution tax is expense so it is debited. Temporary revenues expenses dividends or withdrawals account.

Examples of expense accounts include salaries expense wages expense rent expense supplies expense and interest expense. These are taken into account in determining the amount of any capital gain or loss instead and includes investment returns such as interest dividends and distributions in assessable income.