How to pay myself dividends from my business account to my personal account

Question

Hello,

For some reason, I cannot get these types of transactions to balance out.

I have a corporate account and a personal checking account. Once a month, I do an e-transfer from  my corporate account to my  personal checking account. The category is automatically showing as my corporate account under the category as a transfer (name in bracket). But in my personal account, I want it as showing as dividends received (which I have a category for) and it's shows as personal income under planning.

Right now, as it is a transfer from my corporate account, it does not show as dividends received (thus not showing under my budget as income). If I change the category to dividends received, then my corporate account is out of balance.

Do I need to add another transaction to make it balance?

Thanks

Tom Young · Answer

You are the Chief Accounting Officer here so You make the determination of how transactions will be recorded in Your accounting records.

While it's convenient to have transactions downloaded into Quicken you must understand this: it's literally impossible to rely on downloads to Do Your Accounting for You.

"Best practices" for having accounting records that are accurate and in a format and presentation that you want is to manually make your entries as you see fit, when you make them, and then rely on downloads to confirm (match) the amounts.  But even if you chose to not make manual entries and want to have downloads populate your Accounts, they still are entirely editable by you.  Even if the downloads show up as Transfers in Quicken, (it's actually Quicken making that guess, not anything in the downloads themselves*), you can simply edit them to reflect the accounting you want to see.  Use either of the two methods I've suggested above.

* You might want to go to Edit > Preferences… > Transfer detection and turn off "Scan downloaded transactions for possible transfers."

Momobibi · Answer

Hello Tom,

Thanks for the answer. To be more specific, I'm not "worried" about the actual accounting details regarding the dividends. I should have just said that I'm transferring money from my corporation account to my personal checking account.

Both of these accounts are connected to both banks (different ones) and all transactions come in automatically. On the business side, the transaction appears as a [transfer to checking account] and on the personal side, the transaction appears as a [transfer from corporate account]. This seems accurate. However, I also want to categorize that amount in my personal account as "monthly income" for me; which I already have a category for. So, if I change the category [transfer from corporate account] to "monthly income", then my corporate account does not see it anymore and I'm off balance in that account.

This is the issue I'm trying to solve. Thank you very much,

Tom Young · Answer

First off, you should understand that Quicken can't really handle the accounting for any "corporation" with it's own, separate, tax reporting requirement.  Quicken is set up to deal only with business activities that are included, on Schedule C or E, in your own income tax return.  This could be a single-member LLC that's a disregarded entity per the IRS.  So any attempt to account for a C or Sub-S corporation in the same file as your personal file is going to be challenging, at best.  And if you business is a disregarded entity then it doesn't issue "dividends"; money being transferred between the business checking account and your personal account is simply a transfer because everything in the file is considered to be yours.

If the business activity is really a separate entity with it's own tax reporting requirements, then the best approach would be to keep those activities in a separate file.  The business could send "dividends" to your account, ("dividends" aren't a "cost" to a corporation, they are recorded in specific equity accounts that Quicken doesn't have), and in your file you recognize the income.

If you're bound and determined to keep everything in one file then in the business checking Account you're record a disbursement as a form of "cost", e.g., "Dividends Paid" and in your own checking Account you'd record the deposit as a form of "income", e.g., "Dividends Received."

Another approach which comports more closely with how a corporation would record an actual dividend would be to record the disbursement in the business checking Account but then, in the Category field, enter the name of the business checking Account, surrounded by square brackets.  [Name of Business Checking Account]  That entry would not affect any other Account or Category in the file but would reduce your Net Worth.  I'd probably make sure the memo field for this entry reads "Dividend paid" or something similar, just so you can track the dividends paid.  Then in your personal checking Account you'd record the dividend income.