When setting up a dividends account, what type of account is it if you are paying out a dividend?
submitted by Mac A. Roni

ramblin man

When you're paying out a dividend, the dividends account is usually considered a contra equity account. It's not an asset or liability. It just shows how much profit has been distributed to shareholders.

benny

Dividends paid are recorded as a contra equity account. So, when you're paying dividends, you're reducing retained earnings, and the dividends account acts as a temporary account, which you close out at the end of the period.

ted

The dividends account is where you track how much you've paid out in dividends. It's a contra equity account because it reduces your total shareholders' equity once it's closed out