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Dividend reinvestment amounts under / over Expand / Collapse
Posted 23/04/2009 9:45:21 PM

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Sometimes when a dividend reinvestment is selected the amount issued as a dividend is not the same as the amount that is reinvested.

The initial dividend reinvestment
Lets assume that a company issues an investor $353 of dividend, to be reinvested at $50 per unit. This would leave $3 owing to the investor. In MySF Manager you should record this through the Cash and Journal Processing > Quick Add Dividend > Dividend Reinvestment screen. As you fill in the amounts you should find that $3 is displayed in the bottom right hand corner of the screen as a left over amount. When you post this transaction the $3 is recorded as part of the dividend (so it will be counted as taxable income in this year) but the $3 will go to 1125 Dividends receivable, to show that it is still owed to you and has not actually been received yet.

Note that it is very important to consitently use the same account to record these outstanding amounts. If you have used a few different accounts then you should transfer those amounts accross to 1125 using general journals.

Rolling forward
The amount in account 1125 will simply roll forward from one year to the next as you roll the year over using the year end wizard. The amount will be shown in the balance sheet.

A possible follow up reinvestment
Following from the example above lets assume that the next dividend reinvestment is for $247, reinvested again at $50 per unit, but the investor receives 5 full units because of the $3 owed. In this case record the dividend as $247 reinvested and enter the details of the units received as 5 units at $50. This will cause -$3 to be displayed in the under / over field in the bottom right hand corner. When you process the transaction $3 will be deducted from the amounts owing, so the balance of that account will drop to zero.

Clearing owed amounts
If you sell the stock, or choose not to participate in further DRPs then you may be paid out the amounts owing to you from previous dividend reinvestments where some amounts were left over. In this case you should record a general journal, which will be
DR bank $x
CR 1125 Dividends receivable $x
where $x is the amount that you received. This will cause an increase in cash and a decrease in amounts owed to you.


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