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Cash and Stock Dividends

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Discuss cash dividends and stock dividends. How is each recorded? When each is issued, what is the effect it may have on assets, liabilities and owner's equity?

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Solution Summary

This solution discusses cash dividends and stock dividends, explaining how each is recorded and the effect that each has on assets, liabilities, and owner's equity.

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Dividend is the appropriation of the profits to the shareholders. There are two types of dividends:
1) Cash dividend 2) Stock dividend

Recording of cash dividend:
I. Dividend is paid in form of cash.

1) On authorization of dividend:
Retained earnings ...

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