Scrip Dividends

Scrip dividends are simply a special form of note payable whereby a corporation commits to paying a dividend at some later date. Scrip dividends may be used when there is a cash shortage. On the declaration date, retained earnings are debited and notes payable (instead of dividends payable) is credited. Some scrip dividends even bear interest from the declaration date to the date of payment. See also cash dividend and property dividend.