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Dividends are paid out of retained profits (or contingent liabilities, if interim).
Last year's profits become this year's retained profit at the start of the accounting period.
(I'm sure there's nuance etc... , but ianaa etc...)
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Basic information here.
https://www.gov.uk/running-a-limited-company/taking-money-out-of-a-limited-company
You can pay dividends on all available profits from current and previous financial years.
The aggregate value of previous year profits should be reflected in the Retained Earnings balance on the balance sheet. The double entries when a dividend is declared are a debit to retained earnings and a credit to dividend payable.
You shouldn't rely on this and you should seek expert advice.
NotThamesWater
t-v
@inchpincher
Sorry to spam this thread with my accounting issues.... but... can you issue a dividend on a previous years profit? If so, is there a statute on how far back can you go?