[header] How to account for dividends paid [title] Recognize when to record the liability of the company to pay the cash dividends. [step] This occurs on the " date of declaration, " when the board of directors formally authorizes payment of dividends. Under standard accounting procedures, expenses are recorded when they are incurred. 
In this case, dividend expenses are recorded because by declaring them the company is held liable to make good on the declaration and deliver the dividend. [substeps] A declaration specifies when the declaration is made, when the date of record is, and when the dividend will be paid.