Equity: Q7

Q7: How do we account for a company when it actually pays the dividend to shareholders?

A:

When the company pays the dividend to its shareholders, it will reduce Dividends payable (liability) and Cash (Asset) (if the dividend is paid in cash to shareholders):

DR   Dividends Payable                                 $85m

                                CR   Cash                                                              $85m    

Dividends paid to shareholders: reduces a liability (DR) and reduces an asset (CR)

video

Also, see Martin’s videos Accounting When Company Pays the Dividend

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