When dividends are declared in one fiscal year and paid in the next fiscal year, the liability for the dividend should be recorded as of the:
A) Date the dividend is declared.
B) Last day of the fiscal year.
C) Date of record.
D) Date of payment.

Question

Quizplus · Accepted Answer

The liability for a dividend should be recorded as of the date it is declared by the company's board of directors. This is because the declaration of a dividend creates a legal obligation for the company to pay it to shareholders. Therefore, the liability should be recorded in the same fiscal year as the declaration, even if the actual payment is made in a subsequent fiscal year.

When Dividends Are Declared in One Fiscal Year and Paid