Retained Earnings Mrs. Paz Castro

As to no-par value shares, the dividends are stated at a certain amount per share.

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When the board of directors declares a cash dividend, an entry is made debiting Retained Earnings and crediting Cash Dividends Payable.
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Ex.: A nationally-known business books distribution company declared a cash dividend of P12 per share of ordinary shares of July 1. the dividends are payable on August 1 to shareholders of record on July 21. The company

has 100,000 ordinary shares issued of which 7,000 shares are held in treasury. The entries to

has 100,000 ordinary shares issued of which 7,000 shares are held in treasury. The entries to

record the dividend declaration and payment are as follows:

Retained Earning 1,116,000
Cash Dividends 1,116,000 To record declaration of dividend.
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The account, Cash Dividend, may be used in place of the debit to Retained Earnings. At the
end of the accounting period, this temporary
shareholders’ equity account will be closed by
debiting Retained Earnings and crediting Cash Dividends Declared.

Cash Dividends Payable 1,116,000

Cash 1,116,000
To record payment of dividend.
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Cash dividends payable are reported as current liabilities in the statement of financial position.

With the exception of treasury shares, all issued and fully paid shares, and all subscribed par

value shares are entitled to dividends when declared.

No-par value shares are considered as legally issued only when fully paid.

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Unissued shares, subscribed no-par shares and treasury shares are not entitled to dividends.

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Property Dividends

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Per IFRIC 17, paragraph 11, an entity shall measure a liability to distribute non-cash assets as dividends to its owners at the fair value of the assets to be distributed.
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Ex.: Yummy Food Industries has 5,000 shares investment in another entity accounted for as nonmarketable equity investment. The carrying amount of this investment is P500,000. On Dec. 1, 2013, the company declared as property dividends this investment to all its outstanding par value shares to be distributed on Dec. 15, 2013.