Journal Entry Sequences for Stock Dividends
Accounting practice is 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 this entry for a large dividend for a par value of $1,000,000:
Then, on the date of distribution, this journal entry would be made:
If a financial statement date intervenes between the declaration and distribution dates, the Stock Dividend Distributable account would be disclosed as part of Paid In Capital. If the dividend were classified as small, and the market value of the stock was $3,000,000, these journal entries would be made under this formal approach:
As an alternative, the more expedient approach of deferring any entries until the date of distribution is often used. For the large dividend above, this journal entry would be recorded on the distribution date:
For the small dividend, the journal entry would be:
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.