Definition of a Holder of Record

Publicly held companies send periodic remittances to stockholders to prevent financier defection and ease the minds of investors who fret about solvency or default risk. Top managers send clear instructions on specific conditions that financiers must meet to receive funds, including what holders of record must do if they don't receive their dividend checks on time.

Definition

A holder of record is a shareholder whose name and information figure in a company's stockholder register at a given time. In other words, the holder can prove stock ownership on a specific date, also called the date of record or record date. A stockholder is an investor who has poured cash into a business, generally by buying shares on a public exchange -- also known as a financial market, stock exchange or securities market. Examples include the New York Stock Exchange or London Stock Exchange.

Dividend Payment Process

A dividend payment process gives a perspective of the tactics a company uses to cultivate better relations with investors. The process provides the story -- in part or in toto -- of the way top leadership evaluates the organization's cash balance and reviews how much cash other similarly situated businesses are paying their stockholders. The idea is to avert investor exodus, but also not break corporate vaults and deplete operating funds to satisfy shareholders. There are three important dates in a dividend payment process: declaration, record and payment. The declaration date marks the day corporate management proudly tells the world the company has done so well that it wants to return some cash to investors. The payment date is the day top leadership instructs corporate treasurers to release shareholder money and mail dividend checks.

Accounting

Holders of record heed record and payment dates to ensure prompt receipt of dividend funds. For corporate accountants, the focus is slightly different; they pay more attention to the declaration and payment dates. When a company heralds a future dividend payment, a corporate bookkeeper debits the retained earnings master account and credits the dividends payable account. On the record date, no entry is necessary; a short memorandum about the upcoming remittance is sufficient. On the payment date, the bookkeeper debits the dividends payable account (to bring it back to zero) and credits the cash account. The accounting concepts of credit and debit differ from the banking terminology. Crediting cash means reducing company money.

Financial Reporting

Dividend-related transactions primarily affect two financial statements. Dividends payable -- a short-term liability -- is a balance sheet component, similar to cash. Retained earnings are integral to a balance sheet and a statement of shareholders' equity.

References

• Accounting Coach; How Do Cash Dividends Affect the Financial Statements?; Harold Averkamp
• University of Maryland Smith School of Business; Financial Management (PDF); Dividend Policy
• "Dividend Policy Decisions"; Itzhak Ben-David; May 2010 (PDF)
• New York University Stern School of Business: Dividend Policy
• The Free Dictionary by Farlex: Stockholder of Record