Cash Dividends – How to record a cash dividend – Journal entry for cash dividend

Cash dividends are similar to draws for a sole proprietorship or partnership except with some exceptions. Unlike dividends draws can differ from partner to partner and each partner has control over the amount they with to draw. Dividends still represent money going from the business to the owners, in this case the owners being stockholders. The dividends must be uniform, however. There must be an equal amount of dividend distributed to each stock. The process of recording a dividend is longer as well. We first need to declare a dividend. At the date of declaration we will enter the journal entry decreasing retained earning or increasing dividends in the equity section and increasing a liability account to represent the cash owed to the stockholders. We will then pay the stockholders at a later date, decreasing cash with a credit and decreasing the payable account.
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