What are Dividends Payable?
Dividends payable is the amount owed to shareholders after a dividend has been declared. This account is funded after the company analyzes its quarter and looks at how much profit there is. Then, that profit can be put into a special account, called a dividends payable account, which is then distributed to shareholders of record on a certain date. The dividends payable is often referred to as a liability, and while it is an obligation, many may not consider it a liability. In the truest since, liabilities are debts owed by the company to another party or parties. In this case, even though the payments are to the company’s owners, they are considered liabilities because the corporation has its own, separate identity. In essence, what is truly taking place is that the company’s shareholders are paying themselves money, based on a decision of the executive team and board of directors. Many investors look at the dividends payable to keep track of a company’s finances. They are found in the
Any profit that the firm makes belongs to the owners of that firm. They are the shareholders. The amount of the profit that each shareholder should receive depends on how many shares they own. The more shares they own, the larger the proportion of the company they own and therefore the more of the profit they should receive. This share of the profit is known as a dividend and to spread out fairly, the dividend is normally expressed as an amount per share. The size of the dividend depends on two things. First it depends on the amount of profit that has been made, but secondly it depends on how much of the profit is distributed to the shareholders. Profit is a vital source of funds for investment for a company and so if they were to distribute too much to the shareholders, they would damage their long-term performance. However, at the same time the shareholders are entitled to a share as the reward for the risk they have taken in investing in the company. The Board of Directors has to ba
