Corporate Dividends Payable

by Bernice
(Fort St John)

Captial vs Common Dividends

Captial vs Common Dividends

Bookkeeping Entries For Corporate Dividends Paid



When a corporation pays dividends to it's shareholders, what are the bookkeeping entries?

You would credit the bank - what is the debit side of the entry?

Thanks, Bernice



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Hey Bernice,

When the dividends are declared by the board of directors, your bookkeeping entry would be:

DR Retained Earnings (equity account on your balance sheet) ... OR
DR Dividends (an equity account that is cleared to retained earnings at year-end)

CR Dividends Payable (current liability account on your balance sheet)

When you pay the dividends to the shareholders, your bookkeeping entry would be:

DR Dividends Payable

CR Cash in Bank

Hope this is the information you were looking for.

Comments for
Corporate Dividends Payable

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Jun 06, 2011
 Dividend Cheque Issued
by: Anonymous

The business gets a cheque for dividends from its investment.

By declared, do you mean this is when you enter the dividends that the business gets and is put into the business's account?
Jun 07, 2011
 Declaration of Dividends
by: Lake

Normally, before dividends can be paid (or distributed) to shareholders, the Board of Directors must must first declare a dividend.

The date the Board declares the dividend, an bookkeeping entry is made to record the liability.

A dividend cannot be declared if you have negative retained earnings.

I hope that answers your question.
Jun 07, 2011
 More Help Sorry
by: Anonymous

What if your business bought shares in another business and now you receiving the cheque because they issued their dividends?

Would you DR bank and CR retained earnings?

Would you do the above when you want to distribute your own business's dividends?

Sorry for soooo many questions. I've never done dividends before.
Jun 08, 2011
 Dividends Received On Investment
by: Lake

If the corporation is receiving dividends from an investment, the bookkeeping entry would be DR Cash in Bank and CR Dividend Income or Investment Income.

As a general rule, you should never book an entry to retained earnings unless your accountant tells you.

When your business issues dividends, you would follow what I posted in the previous postings. My preference for booking the initial liability is DR Dividends or Dividends Declared (equity account) and CR Dividends Payable (current liability account).
Nov 22, 2012
 Capital and Common Dividends
by: Anonymous

How is the bookkeeping different for a capital dividend and a common dividend?



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What a great question!

My favorite tax site, taxtips.ca has an excellent definition of a capital dividend:

"Canadian controlled private corporations (CCPCs) keep track of certain non-taxable income amounts, and are able to pay these amounts to shareholders as a capital dividend. The capital dividend is not taxable to the shareholders. The non-taxable income amounts are tracked in the company's capital dividend account, and include the non-taxable portion of capital gains, less the non-allowable portion of capital losses, plus the non-taxable portion of gains on eligible capital property (such as goodwill), plus non-taxable life insurance proceeds."

A common dividend is a dividend paid to common stock holders from the profit. Dividends can't be declared if there are no retained earnings in the company. These dividends are not tax free.

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