Question

On which dates are cash dividends recorded? a. Entry field with incorrect answer b. Declaration date and the record date c. Record date and the payment date d. Declaration date, record date, and payment date e. Declaration date and the payment date

Answer 1

Answer:

The best answer is "E"

Declaration date and the payment date

Explanation:

Declaration date: The date the board of directors formally authorizes a dividend and announces it to stockholders.

Record date: The date when ownership of outstanding shares is determined for dividend purposes.

Payment date: The date dividend checks are mailed to stockholders.

Declaration date and the payment date are recorded for cash dividends

Declaration date, Record date, and Payment date: These are dates that are used when preparing cash div and stock dividends.

Answer 2

Answer:

Option E. Declaration Date, Record Date and Payment Date.

Explanation:

The reason is that the when the cash dividend is announced, the liability of the firm to pay to the shareholders must be recognized. So it must be record the liability in its books of accounts. The entry is given as under:

Dr Retained Earnings      XX

Cr              Dividend Payable XX

The dividend payable amount is results in the decrease in the retained earnings with an equal amount. The date of record is useful because it tells to whom to pay because some shareholders might also sell their stock after dividend declaration so dividends is only paid to investors who actually own the stock on declaration date is entitled to the dividend. The payment date is the date when company pays the cash to its shareholders. The entry is given as under:

Dr Dividend Payable XX

Cr Cash Account             XX