On 15 November, Prairie Sky Software’s board declares a cash dividend of $0.40 per share on 200,000 outstanding common shares, payable 20 December to shareholders of record on 1 December. Record the declaration.
On 15 November, Prairie Sky Software’s board declares a cash dividend of $0.40 per share on 200,000 outstanding common shares, payable 20 December to shareholders of record on 1 December. Record the declaration.
Answer
Dr Dividends Declared 80000; Cr Dividends Payable 80000
Accounts - Dividends Declared - Dividends Payable - Cash - Dividend Expense - Retained Earnings - Common Shares 200,000 × 0.40 = 80,000 becomes a legal liability the moment the board declares. The debit is Dividends Declared (a temporary equity account closed to Retained Earnings at year-end), never Dividend Expense — a dividend distributes profit, it does not reduce it. Nothing is recorded on the record date, and Cash moves only on payment.
Lyryx IFA Vol 2 §18.4; Lyryx Intro FA §10.3; CBCA s. 42