Dictionary / Accrued Dividend
What does Accrued Dividend mean in accounting?
Quick definition
Accrual & timingThe amount of unpaid and undeclared dividend on preferred stock. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
Preferred shares, no year-end vote
Your specialty coffee roaster sold 400 shares of 7% preferred stock to an investor at $250 a share, and the certificate promises $7,000 a year. At the December 31, 2025 close the board has not declared or paid that year's preferred dividend, so the $7,000 is an accrued dividend: unpaid and undeclared. Do not enter Dividends Payable in QuickBooks Online or Xero; keep it with the preferred-stock file and disclose it in the notes. A liability starts only after the board declares.
Declared, still unpaid
On August 11 the board of your commercial print shop votes a $3,600 preferred stock dividend to preferred shareholders and records the minutes. You have not sent the payment. That is a declared dividend, so reduce retained earnings $3,600 and credit Dividends Payable $3,600; it is not an accrued dividend, because accrued dividend is still undeclared. After the August 28 check clears, take the payable to zero and watch current liabilities on the balance sheet.
Why it matters
You will not see this on a typical small-business close. Accrued dividend is the unpaid, undeclared amount on preferred stock; most shops never issue those shares, so it only appears after a stated dividend comes due and the board has not voted it. Book the undeclared amount as dividends payable and you invent a liability the board never created; treat a declared preferred dividend as still just accrued and you hide a real payable. If those shares pay a noncumulative dividend, a skipped period does not carry forward, and the usual work is a footnote plus the stock records, not a monthly journal entry.
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What is Accrued Dividend in bookkeeping?
The amount of unpaid and undeclared dividend on preferred stock.
When should I use Accrued Dividend?
Use Accrued Dividend when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Accrued Dividend?
Accrued Dividend is used for accrued dividend entries, while Abandonment covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.