When is a dividend payment recognized in the shareholders equity portion of the balance sheet?

By Ken Clark AAA
A:

From an accounting point of view, shareholders' equity is decreased by the total dividend amount on the date it is declared by a company's board of directors (B of D). An offsetting "dividends payable" entry is made into the account on the same date. When the dividend is finally paid to shareholders, the account is zeroed out and the company's cash balance is decreased by a corresponding amount.

Divided dates can be some of the most confusing aspects of owning stocks and tracking companies. However, investors should take note of four important dates: the declaration date, the date of record, the ex-date and the payable date.

The declaration date, as mentioned above, is the date a company's board of directors decides to pay a dividend. The date of record is the date by which investors must own the shares of stock in order to become eligible for the upcoming dividend. The ex-date is the date on which the stock trades lower than the amount of the dividend to be paid. The payable date is the date on which the dividend is mailed out or deposited to clients' accounts.

(For more on this topic, read Declaration, Ex-Dividend and Record Date Defined and Stock Basics: Different Types of Stock.)

This question was answered by Ken Clark.

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