Stock dividends are a type of dividend but instead of giving stockholders cash they are given common stock in the company. Dividends are similar to draws for a sole proprietor or partnership but there are some differences. Draws can differ from partner to partner and the partner generally has more say as to how much they would like to draw from the partnership. A dividend needs to be standardized, giving an equal amount to each share of stock. A stock dividend will result in a debit to retained earnings for the value of the dividend, the amount of shares times the market price, a credit to common stock for the par value with is the number of shares times the par value, and a credit to additional paid in capital for the amount the fair market value exceeds the par value. For more accounting information see website. http://accountinginstruction.info/cou…

We will discuss stock dividends and stock splits, similar but different processes.

Stock dividends are similar to normal dividends in that the corporation is giving part of its earnings to the stockholders, to the owners. We will have a date of declaration where we record the dividend and a liability and will then issue the stock dividend in the future. The difference is that we will be giving stockholders stock instead of cash for the dividend. The journal entry for the stock dividend at the time of declaration is a debit to retained earnings or dividend and a credit to stock dividend payable, a liability. At the time of payment we will issue the stock dividend and reduce the liability account.
Stock splits are a bit different in that each stock holder will receive some increase in stock, usually in a ration format. for example if there was a 2 for 1 stock split and we had 4 stock before the stock split we would have 8 stocks after the stock split.
The stock split does not change the percentage ownership. The stock split also does not change the capital account balances. The stock dividend will decrease the par value and increase the number of shares.
For more accounting information see website.

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