Question

What journal entries are passed as required declaration and payment of dividend?

Answer 1

Dividend recieved by Cheque/cash

This transaction affects two accounts.... Dividend Receivable a/c (actual dividend being received ) .. Bank account/cash account (amount is recieved in the form of cheque/cash)

Dividend Receivable account and
Cash/Bank accounts are real accounts (cash and dividend Receivable account are assets; all assets and Liabilities come under Real account)

The Three golden rules of accounting are..

Personal Account : -Debit the receiver credit the giver

Real Account : Debit what comes in , credit what goes out

Nominal Account: Debit All expenses and losses, Credit All incomes and gains


In contention with the above rules..

Bank/cash a/c should be debited (because cash(bank) balance is increasing)

Dividend Receivable account should be credited (because due entry is being reversed)

If there is any recovery .. the entry should be reversed to that extent....

The due entry will be...

Dividend Receivable account Dr xxxx

To Dividend income account xxxx