Wednesday, January 20, 2010

Journalize Paid Dividends

How do you journalize paid dividends? 

For example, suppose that $9,200 in dividends was paid to stockholders.

Accounting Explanation of how to make journal entries for dividends paid to shareholders:

Knowing when the dividend was declared is very important to coming out at the right answer:

If the dividends paid to shareholders were declared in a previous accounting period the journal entry would need to have been the following:  

DEBIT Dividends for 9,200
CREDIT Dividends Payable for 9,200

Next, the journal entry to pay the dividends to the shareholders would be:

DEBIT: Dividends Payable for 9,200
CREDIT: Cash for 9,200

If the Dividends are declared and paid in the same accounting period the journal entry will be much easier and only require the following by the accountant:

DEBIT: Dividends for 9,200
CREDIT: Cash for 9,200

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