Journal Entry Sequences for Stock Dividends

Written by True Tamplin, BSc, CEPF®

Updated on March 29, 2022

Accounting practices are not uniform concerning the actual sequence of entries made to record stock dividends.

A formal procedure would recognize the dividend at the date of the declaration with the following entry for a large dividend for a par value of $1,000,000:

Journal Entry To Recognize Dividends

Then, on the date of distribution, the following journal entry would be made:

Journal Entry On Distribution Date 1

If a financial statement date intervenes between the declaration and distribution dates, the Stock Dividend Distributable account should be disclosed as part of Paid-In Capital.

Modifying the above example slightly, consider that the dividend is classified as small and the market value of the stock is $3,000,000. In this case, the journal entries would be made under the following formal approach:

Journal Entries For Small Stock Dividends

As an alternative, the more expedient approach of deferring any entries until the date of distribution is often used. For the large dividend above, the following journal entry would be recorded on the distribution date:

Journal Entry On Distribution Date 2

For the small dividend, the journal entry would be made as follows:

Journal Entry For Small Stock Dividend

If a balance sheet date intervenes between the declaration and distribution dates, the dividend can be recorded with an adjusting entry or simply disclosed supplementally.

Journal Entry Sequences for Stock Dividends FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.