In accounting, a dividend refers to the distribution of a companys earnings to its shareholders. Dividends are often paid quarterly and can be paid out as cash or in the form of reinvestment in additional stock. The dividend yield is the dividend per share and is expressed as dividend/price as a percentage of a companys share price. The value of a dividend is determined on a per-share basis and is to be paid equally to all shareholders of the same class. The payment must be approved by the Board of Directors. When a dividend is declared, it will then be paid on a certain date, known as the payable date.

It is important to note that dividends declared and paid by a corporation are not an expense of the corporation. Rather, dividends are a distribution of the corporations earnings. This explains why state laws likely require corporations to have a credit balance in Retained Earnings before declaring and paying dividends. When the board of directors declares a dividend, it will result in a debit to Retained Earnings and a credit to a liability such as Dividends Payable. When the corporation pays the dividend, Dividends Payable will be debited and Cash will be credited. Since Retained Earnings is a component of stockholders equity, the declaration and payment of a dividend reduces the corporations assets and its stockholders equity.