Equity: Q7

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


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)


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