Liquidating dividend accounting

Posted by / 05-Nov-2019 15:34

Liquidating dividend accounting

After the regular dividend is paid out, whatever is left over is the liquidating dividend balance.

How It Works Individuals, partnerships or corporations can liquidate assets.A company pays liquidating dividends to its shareholders after it has paid its obligations to its creditors or the individuals to whom it owes money such as suppliers, banks for loans, employees and the government for tax payments.A company distributes part of the company's profit to shareholders as a regular dividend.Since liquidating dividends represent a return of a shareholder's original investment, they are usually not taxed when received by the shareholder.A company will pay liquidating dividends if management believes the market is not valuing the business favorably if it is trying to sell it.

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If there are assets to liquidate, however, the creditors usually file a written claim so they can receive some of the proceeds.