@Tut is correct. (Though as a US-based practitioner I feel compelled to point out; under IFRS businesses do have the option to present dividends received from marketable (“available-for-sale”) securities as investing cash flows, but under US GAAP, these would be considered operating cash flows.)
My view is that as long as there is a use-case, then there should be an option to classify control accounts on cash-flow statement.
So which control accounts need this option? Surely not all of them.
The ones I can think of:
- Customers - for share dividends(as mentioned) and share sales (to cover settlement period - days to settlement)
- Suppliers - for share purchases.
- Inventory - for operating inventory and investing inventory (shares)
There may be others.
There is going to be separate module for share holdings. Inventory module is not appropriate for it.
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@AJD That’s a great point. But I am intrigued by the fact that dividends are accrued prior to being received – I have never seen that before.
Is that by local law or convention? Also, if possible, where are you from?
Tax regulations may require including dividends in the period they are paid, but not everyone prepares accounts only on a tax basis.
When a company declares a dividend, the recipient of the dividend should record that dividend in the accounts, at that date, as accrued income, (if the accounts are being prepared on an accrual basis).
Recording dividends when declared (in accrual accounting) rather than when received sounds reasonable however doing so does seam like a fair bit of work for a small date change.
Remember that the share price will usually go down by the amount of the dividend on the ex-dividend date so that unless you accrue the dividends you will be undervaluing your holding.
As the payment date is usually 3-4 days after the ex-dividend date, this does not usually matter but it could do if the payment date is after a period or year end-date whilst the ex-dividend date is before it.
Not only do tax regulations require that but also financial reporting standards. I know of IFRS and US GAAP and both of those recognize dividends received on cash basis.
But it could be different in your country.
I open a bank transaction whereby the bank pays the value of the goods purchased from suppliers.
In this case, the supplier has received his money and the bank is a creditor to me for the value of the goods and the interest on payment
Therefore, I open a payment account within the control accounts, with reference to current liabilities
@waleed, is this in response to my post #12? If so, I do not understand you. Paying a supplier from a bank account does not make the bank your creditor. Or are you saying you have established a line of credit with the bank and your supplier is being paid by draws against your line of credit?
Whatever your situation is, has it not been affected by program changes announced in the last two days?