cash dividends

[citybeing]

when a company declares a cash dividend, it debits "Cash dividends declared" and credits "Cash Dividends Payable". Does anyone know what kind of account "Cash dividends declared" is? is it an expense account like you are accruing a liability? Thanks!

 

[Crunchyman63]

I guess you could look at it that way.

 

[Jim M]

Citybeing:

It wouldn't be an expense since divs are not tax deductible. It would be a Cash Flow from Operations on the Statement of Cash Flows.

Dr. Divs Declared

Cr. Divs Payable


When paid:


Dr. Divs Payable


Cr. Cash

 

[cpa4life]

At declaration,

Retained Earnings - debit
Div. Payable - credit "this would be classified as a current liability (accrued expense)"

At payable date,

Div. Payable - debit
Cash - credit

Dividends are shown as a outflow on the Statement of Cash flows - financing when "Paid"