Liquidating dividends effect on retained earnings
On the “date of record,” the dividends are assigned to the holders of the company’s stock.On the “date of payment,” the company makes payment of the dividends.Generally, stock dividends are issued from a company’s own stock, or “retained earnings.” There are several possible reasons a company may choose to issue a stock dividend.One reason could be that it doesn’t have enough cash on hand to make a cash dividend payment, but desires to make some form of payment to shareholders to maintain investor confidence in the company.A dividend is classified as a stock dividend when a company issues stock to shareholders as a form of compensation.
Additionally, some fine points of income statements are addressed.
For a corporation, the closing entries cause revenues and expenses to be closed, and the resulting net income is closed to Retained Earnings. The company has revenues of 0,000 and Expenses of ,000 for the period.
Retained Earnings will be increased by the following closing entry: The normal balance of Retained Earnings is a credit balance.
Remember that a credit increases Stockholders' Equity, so we hope that Revenues exceed Expenses.
In the case of a net loss, Expenses will exceed Revenues.