Hi gurus,
Is it common for a bank to put each year's dividend to shareholders to dividend liability on the balance sheet, accumulating dividend liability and not paying it to the shareholders until later? Why
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It's a timing thing. When the dividend is declared (but not yet paid), a dividends payable liability will be increased/created (while shareholders equity will be decreased by the same amount). On the dividend payment date, the dividends payable liability is decreased and cash on the asset side is decreased by the same amount.
The dividend payable liability will be on the balance sheet between the declaration date and the payment date.
Dividends payable liability = dividend was declared/announced but the payment date is not until later.
I could be wrong, who the f knows.
thanks for the clarification.
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