What is the journal entry to record a dividend payable?
As soon as the Board of Directors approves and announces a dividend (on the declaration date) , the company must record a payable in the liability section of the balance sheet. Cash dividends are paid out of the company’s retained earnings, so the journal entry would be a debit to retained earnings and a credit to dividend payable. It is important to realize that the actual cash outflow doesn’t occur until the payment date.
If you are studying for the CPA exam, then sign up for a free trial to have full access to the Universal CPA platform for 7 days here. Universal CPA is the only course that has visual learning and bite-sized video explanations for every single MCQ and simulation.
To learn more about the Universal CPA course and see a demo of the course, visit this link.
Back To All Questions