You can first create an Equity account in your Chart of accounts (COA), then make an Expense transaction to manually record the dividend payment, Jim. I'll elaborate on this further.

By default, the COA in QuickBooks Online (QBO) doesn't always include a specific account for dividends. You'll need an equity account to track them.

Here's how:

1. Go to the Gear icon, then select Chart of accounts.
2. Click the New account button.
3. You can name the account as Dividends Paid.
4. Choose Equity as the Account Type, then Partner Distributions as the Detail Type.
5. Ensure the VAT code is set to No VAT, as dividends are not subject to VAT.
6. Once done, press Save.

Now that you have the correct account, you can manually record the transaction as an Expense. Please follow these steps:

1. Click the + New button and select Expense.
2. Enter your name as the Payee.
3. Choose the correct bank account from which the dividend was paid under the Payment account.
4. In the CATEGORY details, select the Dividends Paid equity account you created.
5. Enter the correct amount of the dividend.
6. Once done, click Save and Close.
   
   
   

By following these steps, the dividend payment will be correctly classified as a reduction of your company's equity on the Balance Sheet. This also ensures your Profit & Loss remains accurate and reflects the true profitability of your business before any distributions to shareholders.

You can always ask us anything related to QBO by entering your concerns in the Community forum. We're always around to help.