How to Account for Dividends Paid
Recognize when to record the liability of the company to pay the cash dividends.. Debit the retained earnings account.. Credit the dividends payable account.
Steps
1
Recognize when to record the liability of the company to pay the cash dividends.
Recognize when to record the liability of the company to pay the cash dividends.
2
Debit the retained earnings account.
Debit the retained earnings account.
3
Credit the dividends payable account.
Credit the dividends payable account.
4
Record the transaction on the date of payment.
Record the transaction on the date of payment.
5
See the big picture.
See the big picture.
6
Understand stock dividends.
Understand stock dividends.
7
Know when to recognize a stock dividend.
Know when to recognize a stock dividend.
8
Find the value of the dividend distribution.
Find the value of the dividend distribution.
9
Debit the retained earnings account.
Debit the retained earnings account.
10
Credit the common stock dividend distributable account.
Credit the common stock dividend distributable account.
11
Credit the paid-in capital in excess of par account.
Credit the paid-in capital in excess of par account.
12
Record the payment of the stock dividends.
Record the payment of the stock dividends.
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