What is an Accrued Dividend
An accrued dividend is a term referring to balance sheet liability that accounts for dividends on common stock that have been declared but not yet paid to shareholders. Accrued dividends are booked as a current liability from the declaration date and remain as such until the dividend payment date. Accrued dividends and "dividends payable" are sometimes interchanged by companies in name.
BREAKING DOWN Accrued Dividend
When a dividend is declared by a company the accrued dividend (or dividend payable) account is credited and the retained earnings account is debited in the amount of the intended dividend payment.
There are no accounting rules that mandate a time frame in which the accrued dividend entry should be recorded, though most companies usually book it a few weeks before the payment date. After the dividend is declared, it becomes the property of the record-date shareholder and is considered separate from the stock. This separation allows the shareholders to become creditors of the company, due to their dividend payment, should a merger or some other corporate action occur.
Where to Find Accrued Dividends
Accrued dividends for common stock do not typically show up as a separate line item under current liabilities on a company's balance sheet. The Walt Disney Company, for example, tucks these dividends payable under "Accounts payable and other accrued liabilities." The amount of the dividend that will be paid in the future is located in the statement of shareholders' equity. Accrued dividends on preferred stock, if any, may be found in the notes to financial statements.