Methods of recording a dividend in Xero
There are two methods of recording a dividend in Xero:
- As a ‘create’ payment; or
- As a manual journal
The first option is the best when you pay the dividend at the same time as declaring it. The second option is best when you want to record the dividend but not pay it out at this time (ie. by accruing it to a loan account).
Doing a ‘create’ payment
When you complete your bank reconciliation one of the options is the Create tab. This will only appear of course if you have already paid the dividend.
Using the Create tab fill out the reconciliation box as follows:
See below if you don’t have a Dividends Declared account in Xero.
Entering a manual journal
A manual journal is the nuts and bolts of double entry accounting. In most cases non-accountant shouldn’t have to post these but occasionally it is necessary. Xero hides away this feature for most users but you can find it at this link: https://go.xero.com/Journal/Search.aspx.
Click + New Journal and then complete the page as follows:
This will record £2,000 to be owed to you, with the amount stored in the Directors’ Loan Account.
Adding a Dividends Declared Account
Not all Xero accounts will have a Dividends Declared account by default. You may have to add on yourself. To do that follow these instructions: