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Jayesh Gupta
Jayesh GuptaCurious
In: 1. Financial Accounting > Journal Entries

What is the journal entry for dividend collected by bank?

What is the journal entry for dividend collected by bank?
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    1 Answer

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    1. AbhishekBatabyal Curious Pursuing CA, BCOM (HONS)
      2022-07-27T19:40:25+00:00Added an answer on July 27, 2022 at 7:40 pm
      This answer was edited.

      The journal entry for the dividend collected by the bank is as follows:

      Bank A/c                                                                Dr. Amt
      To Dividend Received A/c Amt

      Here, Bank Account is debited and the Dividend Received Account is credited. This treatment is explained below.

      The logic behind the journal entry

      This can be explained through the following rules of accounting:

      • Golden rules of accounting
      • Modern rules of accounting

      Golden rules of accounting

      A bank account is a real account and the golden rule of accounting for the real account is, “Debit what comes in and credit what goes out”

      Hence, the bank account is debited as the money is coming into the bank.

      Dividend is an income hence dividend received is a nominal account. The golden rule of accounting for a nominal account is “Debit all expenses and losses and credit all income and gains”

      Hence, the dividend received account is credited as income.

      Modern rules of accounting

      As per modern rules of accounting, a bank account is an asset account.

      The asset account is debited when increased and credited when decreased.

      Hence, the Bank account is debited here as it is increased.

      A dividend received account is an income account.

      The income account is credited when increase and debited when decreased.

      Hence, the dividend received account is credited here as it is increased.

      Treatment in the financial statements

      Since the dividend received is an income; it is shown on the credit side of the Statement of profit and loss.

      The bank account is an asset so it will be shown on the balance sheet.

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