What Are Ordinary Dividends?
Cash dividends are dividends distributed to shareholders in the form of cash. From the perspective of investors, the reason why they invest in stocks is to obtain a generous cash dividend. From the perspective of the company's board of directors, for the development of the company, it is necessary to retain sufficient cash to increase equipment and supplement working capital, and hope to limit dividends to a lower level. However, the amount of dividends paid by the company directly affects the market price of the company's stock, which in turn affects the company's ability to raise capital. Therefore, the company's board of directors must weigh the weight and formulate a reasonable dividend policy. To distribute cash dividends, three conditions must be met at the same time: (1) There is sufficient retained earnings. (2) Have enough cash. (3) The decision of the board of directors. The board's decision is based on the first two conditions. [1]
Cash dividend
- Shanghai A-share cash dividend distribution schedule:
- 1] Before T-5 (T is the date of announcement), the application materials are sent to China Clearing Corporation
- 2] T-3 days before the approval of China Clearing Corporation
- 3] T-1 forward
- When a company adopts a cash dividend, it must have two basic conditions:
- First, the company must have sufficient
Cash Dividend Accounting
- Account processing for cash dividends:
- Cash dividends are dividends paid to shareholders in cash, which is also the most common form of dividend distribution. The main reason why investors invest in stocks is to get more cash dividends than ordinary investors. To distribute cash dividends, there must be three conditions: 1 there is sufficient retained earnings; 2 there is sufficient cash; and 3 there is a decision of the board of directors. Example 1: The board of directors of Company A announced a dividend on December 1 of a certain year, with 1,000 preferred shares at 2 yuan per share and 10,000 ordinary shares at 1 yuan per share. The closing date for transfers is December 20 of the year, and the dividends are distributed on January 5 of the following year. The accounting treatment is as follows:
- When announcing a dividend:
- Borrow: Profit distribution 12000
- Loan: Dividend payable ----Dividend payable to preferred stock 2000
- Cash dividend
- Dividend payable to ordinary shares 10000
- When distributing cash dividends:
- Borrow: Dividends payable ----Dividends payable on preferred shares 2000
- Dividend payable to ordinary shares 10000
- Loan: bank deposit 12000
Cash Dividend Dividend Processing
- Handling of cash dividends declared by the investee during the period when the investor holds the stock
- When accounting for transaction financial assets
- Borrow: Dividend receivable
- Loan: Investment income
- When accounting for financial assets classified as available for sale
- Borrow: Dividend receivable
- Loan: Investment income
- When classified as long-term equity investment
- Cost method
- Borrow: Dividend receivable
- Loan: Investment income
- Cash dividend
- Equity method
- Borrow: Dividend receivable
- Loan: Long-Term Equity Investment-Profit and Loss Adjustment
- What to do when the investee declares a cash dividend
- Borrow: profit distribution-undistributed profit, etc.
- Loan: Dividend payable