Managing Company Shareholders

Hello everyone,

I couldn’t find anywhere how to manage shareholders in terms of chart of accounts. In the equity group there are capital stock, paid dividends and retained earnings but these accounts aren’t shareholder specific (they are general and don’t belong to any shareholder).

That being said, how to manage shareholders on terms of distributing dividends, reinvesting and withdrawals? And if these accounts must be shareholder specific, how can I link a shareholder to the accounts that belongs to that shareholder?

I have a great accounting background and I can do all this in accounting books but not in ERPNext, so please forgive my lack of knowledge and any help will be appreciated.

Best regards.

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Click on Accounting and scroll down

Welcome to erpnext forum mate.
would be great if you would make a little guide or teach us with less accounting knowledge now that you know where it is :upside_down_face:

@Araskho As far as I have understood ERPNext docs, the accounts Capital Stock, Paid Dividends and Retained Earnings doesn’t have to be changed.

The following are what I know:

Issuing Shares

  1. we have to go to Shareholder List and create a new shareholder.
  2. Then we go to the Share Transfer List and create a new share transfer entry, select Issue in the Transfer Type field, then fill the other fields and then Save the entry. The save button will then change to Submit since this entry must be submitted to be confirmed.
  3. After submitting the entry, from the Other Actions button next to Cancel, we must select Create Journal Entry to add the share transfer entry to the ledgers. This action will credit the Capital Stock account and will debit the Bank or Cash account, as stated in the journal entry.

Paying Dividends

  1. we must go to Bank List to create banks that will be linked to the Bank Account of the company and of each shareholder. Then we go to Bank Account List to create the bank accounts we need.
  • We create a new bank account for the company, by simply checking the boxes Is Default Account & Is Company Account in the form and filling the other fields as needed.
  • We create a bank account for each shareholder, by simply checking the box Is Default Account, setting the Party Type as Shareholder and selecting the specific shareholder in the Party field.
  1. There are two ways that we can use to pay the dividends to the shareholders and they are stated here Payment Entry for Capital Account. I think that the best method is to go to Journal Entry List, create a new entry and then in the Accounting Entries table add the following rows
  • Bank or Cash account to be credited with specifying the company bank
  • Paid Dividends account with specifying the shareholder bank account created earlier, selecting Shareholder as the Party Type and then selecting the shareholder we want to pay in the Party field

Withdrawals of Capital & Retained Earnings

Retained earnings represent the portion of profits that a company chooses to keep.

These can be done using the information mentioned in step no.2 in the Paying Dividends section, but changing the Accounting Entries as needed.

  1. For Withdrawals of Capital, credit the Bank or Cash account and debit the Capital Stock account.
  2. For Retained Earnings, credit the Bank or Cash account and debit the Retained Earnings account, then when the earnings are paid to shareholders, credit the Retained Earnings account and debit the Paid Dividends account, with specifying the shareholder bank account created earlier, selecting Shareholder as the Party Type and then selecting the shareholder we want to pay in the Party field

That’s all that I know until now regarding Managing Shareholders. I wish that someone with more experience in ERPNext will be able to correct me if I’m wrong.

Best regards.


@centaur Thanks for your reply. But I already know that information and what I want to know is how to pay dividends throughout either creating a payment entry or a journal entry while linking the transaction to the shareholder just like the journal entry created when issuing shares.

If the process I mentioned in the previous post is correct then I would have answered my own question :blush:

What you’ve described looks right to me. It’s not strictly necessary to use the Bank Account doctypes for any of this, but it adds a layer of abstraction above your chart of accounts that may be helpful (especially when non-accountants need to process documents).

I haven’t used the Stock Transfer doctypes much, but it looks like they just create a record that can be then used to generate a journal entry. Those journal entries are linked to the shareholders via the party field. No need to make a separate account for each shareholder. Is that sufficient for the accounting requirements?

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@peterg Thank you for your confirmation. That’s all that I needed.

In terms of the Bank Account, ERPNext mentioned in the Docs that doing so will help in Bank Reconciliation which I personally haven’t checked yet.

Best regards.

Tnx, Much appreciated.
hope to see you around.