Dividends Payable

Definition: Declared but unpaid dividends

Scope:NarrowDifficulty:Easy

Declared but unpaid dividends

Common Journal Entries
AccountDebitCredit
1. Declare cash dividend
Board declares $25,000 dividend.
Retained EarningsEquity−$25,000
Dividends PayableLiability+$25,000
Liability created on declaration date.
2. Pay dividend
Pay $25,000 on payment date.
Dividends PayableLiability−$25,000
CashAsset−$25,000
Liability settled. Cash decreases.

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
DurationShort-Term

Related Subjects

See Also

  • CashPaired in entry: Pay cash dividend

External Links