Nistha In: 1. Financial Accounting > Journal Entries What is dividend paid journal entry? What is dividend paid journal entry? Journal Entry Share Facebook You must login to add an answer. Username or email* Password* Captcha* Remember Me! Forgot Password? Need An Account, Sign Up Here 1 Answer Voted Recent Radhika 2021-11-18T07:48:01+00:00Added an answer on November 18, 2021 at 7:48 am This answer was edited. When a company earns profit, it distributes a proportion of its income to its shareholders, and such distribution is called the dividend. The dividend is allocated as a fixed amount per share and shareholders receive dividends proportional to their shareholdings. However, a company can only pay dividends out of its current year profits or retained earnings (profits of the company that are not distributed as dividend and retained in the business is called retained earnings) of previous years but not out of capital. Dividends can be paid to shareholders in the form of Cash dividend re-investing plan of the company future shares share repurchase. For companies, payment of regular dividends boosts the morale of the shareholders, investors trust the companies more and it reflects positively on the share price of the company. For example, Nestle in India paid an interim dividend of 1100.00% to its shareholders in 2021. The journal entry for dividend paid is Particulars Debit Credit Retained Earnings A/c Dr. Amt To Cash A/c Amt According to the golden rules of accounting- Retained earnings is a credit account by nature and since dividends are paid from retained earnings resulting in a deduction of the account, we debit Cash is credited because the account is debit in nature and since dividends are paid in cash it’s credited to present the deduction in the account. According to modern rules of accounting- Since cash is decreasing, we credit Since retained earnings are decreasing and it is a part of capital it should be For example- A company paid a dividend of 25 crores to its shareholders in cash, the journal entry according to golden rules will be- Particulars Debit (in crores) Credit (in crores) Retained Earnings A/c (Dr.) 25 To Cash A/c 25 0 Share Share Share on Facebook Share on Twitter Share on LinkedIn Share on WhatsApp Related Questions What is the journal entry for calls in advance? Can you explain interest received in advance with journal entry? Can you explain subscription received in advance with journal entry? Can you explain rent received in advance with journal entry?