Accounting question

BlancoNino

Diamond Member
Oct 31, 2005
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Edit - Scratch my first question.

If I'm doing a statement of cash flows, I can assume that dividends paid = increase in retained earnings - net income. How would my analysis change if stock dividends was actually listed on the balance sheet?
 

LegendKiller

Lifer
Mar 5, 2001
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How could it ever be listed on the BS? I suppose you could have a liability for deferred or a payable for dividends due, but otherwise, it'd never show up.

Also, your formula up there would always be negative. Just a minor nit.
 

BlancoNino

Diamond Member
Oct 31, 2005
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Originally posted by: LegendKiller
How could it ever be listed on the BS? I suppose you could have a liability for deferred or a payable for dividends due, but otherwise, it'd never show up.

Also, your formula up there would always be negative. Just a minor nit.

Whoops. I didn't mean listed ont he balance sheet. I meant if there was a stock dividend present, how should that change my analysis of the balance sheet. I mean I already calculated that it's the only thing missing that would be affecting the retained earnings and computed it via the method I posted above. So I did my statement of cash flows and included a dividend paid and now I'm supposed to figure this out. Should I just say that it wouldn't affect my analysis?

My formula is for my lazy ass using my calculator :)

 

TipsyMcStagger

Senior member
Sep 19, 2003
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Maybe I don't understand your formula there, but Dividends declared (both stock and cash) are a decrease of retained earnings, not an increase.

I wouldn't think stock dividends would actually show up on the statement of cash flows anyway, its a non-cash transaction.

A stock dividend journal entry is simply

Debit Retained Earnings
Credit Capital stock @ par value
 

BlancoNino

Diamond Member
Oct 31, 2005
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Originally posted by: TipsyMcStagger
Maybe I don't understand your formula there, but Dividends declared (both stock and cash) are a decrease of retained earnings, not an increase.

I wouldn't think stock dividends would actually show up on the statement of cash flows anyway, its a non-cash transaction.

A stock dividend journal entry is simply

Debit Retained Earnings
Credit Capital stock @ par value

Cash dividends paid.