Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

When does a dividend become a liability to a corporation?

When the board of directors declares the dividend

When the corporation earns sufficient profits

When the shareholders approve the dividend

When the dividend is paid to shareholders

Previous problemNext problem

Verified step by step guidance

Understand the concept of dividends: Dividends are distributions of a corporation's earnings to its shareholders, typically in the form of cash or additional shares.

Learn about the declaration of dividends: A dividend becomes a liability to the corporation when the board of directors formally declares it. This declaration creates a legal obligation for the corporation to pay the dividend.

Clarify the timing of liability recognition: The liability is recorded on the corporation's balance sheet as 'Dividends Payable' once the declaration is made, regardless of when the payment is actually made to shareholders.

Differentiate between declaration and other events: Earning profits, shareholder approval, or payment of dividends do not create a liability. Only the formal declaration by the board of directors establishes the obligation.

Review the accounting treatment: After the declaration, the corporation records the liability by debiting 'Retained Earnings' and crediting 'Dividends Payable' in its accounting records.