What is the Dividend Element?
The Dividend element is the recommended approach for recording dividend expenses in Castaway. It is a special inbuilt element designed to record declared dividend expenses, dividend liabilities and dividend payments. It is found at the bottom of the P&L section within the chart of accounts.
The Dividend Payable line in the Balance Sheet is the partner account of the Dividend element, where any actual outstanding dividend payable balance is recorded.
The Dividend element can also be used to model other types of profit distribution such as trusts or partnerships. In these cases, the element can be renamed to suit — for example, 'Trust Distribution' or 'Partner Distribution'.
Dividend Expense Calculation Methods
| Method | When to Use |
|---|---|
| Enter Dividend Expense | Manual entry of dividend expense values |
| Units x Rate | Calculate dividend based on share units and a rate per unit |
| Link to Equity Units | Links to equity units where the equity calculation method is set to Unit x Rate or Driver x Rate |
| % of Net Profit After Tax | Calculates dividend as a percentage of NPAT |
| Periodic % of NPAT | Distributes a percentage of NPAT at the end of a defined period |
Using Periodic % of NPAT
This method is suited to companies that distribute their entire NPAT at the end of a financial year or other defined period. Set the cycle to the number of months in the distribution period (for example, 12 for an annual distribution) and select the intended end month. This automates the dividend expense and payment at the end of each cycle.
Recording Dividends Received
Dividends received are recorded separately from the Dividend element. Three approaches are available depending on your requirements:
| Approach | Element Used | Best Suited For |
|---|---|---|
| Record as revenue | Sales element | Where dividend income is a significant or separate revenue stream to be highlighted in the financial statements |
| Record as investment income | Investment element | Where investment income needs to be tracked distinctly from other income types such as sales revenue |
| Record via balance sheet | Other Asset/Liability element | Where dividend income needs to be reported in the context of other current or non-current balance sheet items, or where a non-cash dividend needs to be modelled |
Using a Sales Element
One approach to recording dividends received is to use a Sales element, treating the dividend as a revenue item in the same way as income from goods or services. This approach is best suited where dividend income is tracked separately from other investment income, or where dividend income is a significant stream to be highlighted in the financial statements.
Using an Investment Element
Dividends received can be recorded as investment income using the Investment element. This approach is best suited where investment income needs to be tracked separately from other income types such as sales revenue.
When using this method, the Investment Income Treatment setting controls how the dividend is handled:
| Income Treatment Setting | Use For |
|---|---|
| Reinvested | Non-cash dividend income |
| Received in Cash | Cash dividend income |
Using an Other Asset/Liability Element
Dividends received can also be recorded using an Other Asset/Liability element. This approach is best suited where dividend income needs to be tracked in the context of other current or non-current balance sheet items.
When using this method:
- Enter the dividend income value in the revenue line.
- Enter the cash receipt in the receipts line.
- To model a non-cash dividend, enter the value in the revenue line only and leave the receipts line empty.
Available Account Types when using the Other Asset/Liability element include: