Cash Dividend (also see Dividend section)

Cash Dividend. This is the payment of actual cash from the company directly to the qualifying shareholders and is the most common type of payment. The payment is usually made electronically, but may also be paid by cheque and dispatched by mail. (see section on share classes)

The total dividend paid is a deduction from retained earnings. It is not an expense for bookkeeping purposes. The amount appears as a debit in the balance sheet. It does not feature on the income statement.

When a dividend is declared, the company debits its retained profits/earnings and credits a liability account called dividend payable. On the date of payment, the company reverses the dividend payable with a debit entry and credits its

cash account for the respective cash outflow.

Dividends shrink a company's shareholders equity and cash balance by the same amount. Firms must report any cash dividend as payments in the financing activity section of their cashflow statement reflecting the cash paid away.

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