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Dividend Declaration Date

Brian Krogol
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Alright in this video we're gonna discuss some details about dividends. There's some important dates that we have to remember as well as some ideas about dividend preferences. Let's check it out. So let's start here with the important dates, there's going to be 33 important dates every time that we talk about dividends. Okay, up to this point, we've just just said that dividends were declared and paid on the same day. Well now we're gonna separate it into a more realistic situation. So the first thing that happens is that the company is gonna declare dividends, there's gonna be the declaration date. Okay? So it's not like they're gonna say hey we're gonna pay dividends and then they pay them immediately know they're gonna say hey we're gonna pay dividends and then at a later date they're gonna pay them. So the first entry here is going to be on the declaration date. This is the date that the public, the company publicly announces that there's gonna be dividends. So let's follow through an example on March 14th. The board of directors of the apartment depot announces a dividend of 300,000. Alright, so it's very important to remember that on the declaration Is where we make our journal entry for the dividends. So because we declared that we're going to pay dividends, we are now liable to pay dividends. So what we need to do is we're going to debit the dividends account at this point on March 14. The declaration date. We're going to debit dividends for the 300,000. We're gonna pay out and we're going to credit our dividends payable. So notice we've created a liability at this point, right? This payable dividends payable is a liability because we've told the public that we're gonna pay this dividend of 300,000. Now we are liable to the public to pay this dividend. Okay? So now we have to accrue this liability for these dividends that we declared. Okay because we're not just gonna be declaring dividends willy nilly now we have to declare them because we know that we're capable of paying them. So at this point on the declaration date we have to make a journal entry to reduce or to to reduce our equity by taking this dividends entry and increase our liabilities. So that's exactly what happens here. The dividends is a reduction of our equity, that's eventually going to reduce our net are retained earnings. Right? So that reduces our equity. But the dividends payable here dividends, I'm gonna put div payable that is an increase to our liabilities of 300,000. So we stay balanced here, write the equation stays balanced. Um And that's a very important entry. Okay, so you're you're gonna want to pay attention. There's gonna be the three dates here. The first one is the declaration date. And then why don't we pause here and we'll talk about the date of record in the next video