Cash Dividends

Definition: Dividends paid in cash

Scope:ModerateDifficulty:Very Easy
Part of: Retained Earnings

Dividends paid in cash

Common Journal Entries
AccountDebitCredit
1. Declaration date
Board declares $1.25/share × 20,000 shares = $25,000.
Retained EarningsEquity−$25,000
Dividends PayableLiability+$25,000
Liability created on declaration date.
2. Payment date
Pay $25,000 to shareholders.
Dividends PayableLiability−$25,000
CashAsset−$25,000
Cash paid; no entry on record date.

T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.

Retained EarningsRetained EarningsEquityThe owner’s residual interest in the business. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$25,000.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
Normal bal. ▶
$25,000.00
Dividends PayableDividends PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$25,000.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$25,000.00
Normal bal. ▶
$0.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$25,000.00
$25,000.00
DurationN/A

Related Subjects

See Also

External Links