Accrued Dividend

As we know dividend is the amount of profit that is paid to the shareholders of a business or a company. Sometimes dividend is declared but not paid immediately to the shareholders. Such dividend that has been recorded in the balance sheet as a new entry but not paid to the shareholders yet is called accrued dividend. Accrued dividend is considered as the liability of the firm and is kept in recorded from the date it has been declared by the business or company. Until fully paid accrued dividend remain recorded as a liability in the balance sheet. Some people may confuse accrued dividend with another important term that is called accumulated dividend. Unlike accrued dividend accumulated dividend that is declared but due to shareholders holding preferred stock.

According to GAAP or other accounting rules there is no specific for declaration and recording accrued dividend. The time span for which these dividends are kept recorded but unpaid is also defined by general accounting rules. Most of the firms record this dividend in balance sheet few weeks prior to the payment date that is decided to pay the shareholders. After recording and declaration of accrued dividend it’s no longer remains the part of the stock of the business instead it becomes the property of the shareholder. As the payment to the shareholder is not done so it becomes as a creditor of the company for that short span of time. Sometimes the dividend amount recorded and declared becomes so large that a business has to do merger or some other compensating action with the shareholders.

Other Related Accounting Articles:

• Different Types of Dividends
• Dividend Capture Strategy
• Accrued Interest
• Explanation of Statement of Retained Earnings
• Earned Capital
• Current Liabilities Explained
• What are Wage Expenses?
• How to define a dividend policy
• Regulatory Asset
• Fixed Income Security