Accounting Ch8 part 2

Accounting Ch8 part 2 - Retained earnings are not cash! The...

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Retained earnings are not cash! The only factors affecting earnings are net income or loss reported on the income statement, and dividends. If Retained Earnings account has a negative balance because cumulative losses and dividends have exceeded cumulative net income, this account is referred to as an accumulated deficit. For a corporation to pay a cash dividend, it must meet several requirements: The firm must have retained earnings, the board of directors must declare the dividend, and the firm must have enough cash to pay the dividend. Dividends are not an expense! o Declaration date: L: (+Dividends Payable), OE: (-Retained Earnings) o Payment date: A: (-Cash), L: (Dividends Payable) Declaration date is the date on which the board of directors declares the dividend and it becomes a legal liability to be paid. The record date is used to determine who receives the dividend. The owner of record is the person to whom the check is made payable and mailed to on the payment date. The ex-
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Accounting Ch8 part 2 - Retained earnings are not cash! The...

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