Is a nonliquidating dividend recorded as dividend income?
Nonliquidating dividends are normal dividends that should be recognized in net income. Nonliquidating dividends are not distributions in excess of that particular shareholders share of retained earnings.
Remember that liquidating dividends are not reported as dividend income. Rather liquidating dividends are recorded as a reduction to the investment account on the balance sheet since the company is returning capital to its shareholders.
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What is a liquidating dividend and a nonliquidating dividend?
Dividends from equity securities will either be deemed liquidating or nonliquidating dividends. Think of liquidating dividends as dividends that are in excess of that particular investors overall share of the retained earnings that they are entitled to. Nonliquidating dividends are normal dividends that should be recognized in net income. Nonliquidating dividends are not distributions in […]
Is a liquidating dividend recorded as dividend income?
No, if a company issues a liquidating dividend, that means they are liquidating the company and returning the money to shareholders. The company receiving the liquidating dividend would reduce the investment amount on the balance sheet by the dividend. Only nonliquidating dividends are recorded as dividend income in the income statement.