Question

Under what circumstance should dividends be recognized? a. On a cash basis b. On an accrual...

Under what circumstance should dividends be recognized?

a. On a cash basis

b. On an accrual basis

c. When shareholders have legal rights to receive payments

d. On an actual basis where dividends are declared

Homework Answers

Answer #1

The correct answer is c. When shareholders have legal rights to receive payments

Dividends should be recognized when shareholders have legal rights to receive payments.

Dividends are the portion of earnings of a company which is distributed to the shareholders. Dividends are usually approved by the shareholders and declared by the board of directors. Dividends are paid only to the shareholder who owns the share. Dividends should be recognized when right to receive dividends by shareholders has been established.

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