Cash dividend payable is classified as a current liability once declared.Group of answer choicesTrueFalse

Answer

True.

Cash dividends payable are classified as a current liability on a company's balance sheet once they are declared by the board of directors. This classification arises because once the dividends are declared, the company has a legal obligation to pay the shareholders within the prescribed time frame, typically within the next accounting period.

Before declaration, dividends are simply a proposed allocation of earnings and do not create a liability. However, once the declaration is made, it represents a fixed amount that the company is required to pay to its shareholders, reflecting a commitment to distribute resources. This commitment falls under the definition of current liabilities, as it is expected to be settled in the near term, usually within one year.

In summary, the correct answer is True.