Hi
A client has declared too much in dividends (paid weekly with correct paperwork in place) and as a result, the Ltd company has negative reserves. (before I got involved!)
However there is a credit balance on the DCA from capital put into the company to start up with. What's the best procedure?
1) Net the dividends against the DCA reducing the negative - this effectively reclassifies the dividends which I didn't think was allowed and may cause problems with dividend payments next year?
2)Leave all as it is and deal with it next year
3) Any other options
It's had my head going round in circles today. Any help appreciated.
Thanks
Replies (4)
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Distributable reserves information
"A client has declared too much in dividends (paid weekly with correct paperwork in place) "
How can the client have declared too much if the paperwork was correct. What distributable reserves where shown when the decision to pay a dividend was made?
Actual not projected
Dividends shouldn't be based on projected profits. They should be based on actual profits. If the profits had been achieved and dividends based on them - it doesn't matter if later losses make the distributable profits negative.