Hi all,
I'm trying to get some clarity on how Dividends Paid vs. Payable affects Retained Earnings.
Looking at the formula: Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends
I understand that Dividends Payable are a liability for dividends yet to be paid, and that Dividends Paid represents the actual cash outflow to shareholders in the past.
My assumption is that we use Dividends Payable rather than Paid to calculate Ending Retained Earnings on the basis that the Dividends Paid have already reduced the Dividends Payable account on the Balance Sheet.
Is this correct?
I'm trying to get some clarity on how Dividends Paid vs. Payable affects Retained Earnings.
Looking at the formula: Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends
I understand that Dividends Payable are a liability for dividends yet to be paid, and that Dividends Paid represents the actual cash outflow to shareholders in the past.
My assumption is that we use Dividends Payable rather than Paid to calculate Ending Retained Earnings on the basis that the Dividends Paid have already reduced the Dividends Payable account on the Balance Sheet.
Is this correct?