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Frequently Asked Questions

Are dividends a credit or debit?

When a corporation declares a dividend on its common stock, it will credit a current liability account Dividends Payable and will debit either 1) Retained Earnings, or 2) Cash Dividends Declared. Cash Dividends Declared is a balance sheet account, but it is a temporary account.

How do dividends affect the balance sheet?

Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing retained earnings on the equity side.

Do dividends belong on balance sheet?

Cash Dividends Declared is a temporary account on the balance sheet where common stock dividends are listed in the period in which they are declared, as defined by Accounting Coach. When the company pays out the dividends declared, then the account is emptied and removed from the balance sheet.


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