How to Calculate a Payment Dividend on Balance Sheets

by D. Laverne O'Neal

A dividend represents a portion of a company's earnings. Each year, the company's board of directors decides whether to pay dividends to shareholders and if so, how much. Dividends are typically referred to as a dollars-per-share figure. Established companies often pay dividends in cash. Once a dividend is declared by the board of directors, the amount is deducted on the balance sheet from the company's retained earnings.

Step 1

Look for the retained earnings figure on the previous year and current year balance sheet. It is listed in the shareholders' equity section.

Step 2

Search for the year-end net earnings figure on the current year's balance sheet.

Step 3

Add the previous year's retained earnings figure to the current year's net earnings. For example, if last year's retained earnings amounted to $200,000 and this year's net earnings came to $50,000, adding the two figures would result in a figure of $250,000.

Step 4

Deduct the current year retained earnings figure from the result of that calculation. If this year's retained earnings figure is $220,000, the calculation is $250,000 minus $200,000, which equals $30,000 in dividends paid.

Items you will need

  • Balance sheets from last year and current year
  • Income statement for current year
  • Calculator