Dictionary of Accounting Terms: liquidating dividend
liquidating dividend
return of capital rather than a distribution of retained earnings. Such a dividend may occur with a natural resource company having wasting assets (e.g., oil, coal) or when a company in a state of liquidation desires to distribute cash or other assets on a pro rata basis to its owners. The journal entry is to debit paid-in capital and credit cash. Because the distribution to stockholders is from capital rather than earnings, no tax is paid on it.
Dictionary of Finance and Investment Terms: liquidating dividend
liquidating dividend
distribution of assets in the form of a dividend from a corporation that is going out of business. Such a payment may come when a firm goes bankrupt or when management decides to sell off a company's assets and pass the proceeds on to shareholders.
