What is a dividend?
A dividend is when a company distributes profits to its shareholders. Typically, dividends are in the form of cash and are distributed when the company has excess cash that is not reinvested into the business. A company can also issue a stock dividend or property dividend.
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When must a company record a liability for a cash dividend?
When the Board of Directors approve and announce a cash dividend, then the company must record a liability for the dividend. This date is known as the “Declaration Date”.