Proposed dividend is debited in p/l a/c and shown at liability side of b/s. Then next year while paying this dividend do we again debit in p/l a/c to show this as expense? How do we remove proposed dividend from balance sheet when already paid? Explain this with the journal entry.

Dear Student


In the year of Declaration of Proposed Dividend the entry we pass is :

Journal in the books
Date	Particulars		Debit	Credit
	Profit and Loss A/c	Dr.	xxx
	To Proposed Dividend (for Year 1) A/c			xxxx
	(Being dividend proposed shall be paid on approval form shareholders)

Now this proposed dividend is shown in the balance sheet of the company as a liability.

At the time of actual payment this Proposed dividend account itself is again debited and not the profit and loss account, you seem to get confused, the correct entry in next year for payment of dividend once declared previously is :​

	Payment of Dividend and Closing of proposed dividend account
	Proposed Dividend (For Year 1) A/c	Dr.	xxx
	To Bank A/c			xxx
	(Being Dividend paid for previous year)

Therefore see here same proposed dividend is credited(liability) and debited for payment hence this account shall be closed.

Hope this helps
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