Answer to Question #152655 in Management for Wajahat Ali Raki

Question

Why are the firm’s employees not valued as asset on balance sheet? (b) Can cash dividends be paid from retained earnings? Comment?

Answer 1

Why the Firm’s Employees are not Valued as Asset on Balance Sheet

Companies' assets are the things that the Corporations own such as cars and buildings. The reason why the firm's workers are not valued as an asset on the balance sheet is that the businesses do not own the employees. According to Gadekar, workers are not assets because firms do not regulate them. Employees change raw materials to finished stock in exchange for payment. Nevertheless, if the employees feel like quitting, they go with their skills and training. Therefore, firms cannot value their workers as assets on the balance sheet.

Whether Cash Dividends can be Paid from Retained Earnings

Yes, cash dividends can be paid from retained earnings. However, it follows a process. First, companies declare dividends then debit their retained earnings while crediting dividends payables account. As the firms pay the dividends, they debit the dividends payables account while crediting the cash account. Therefore, in this case, cash dividends are paid from retained earnings as it is the source.

Works Cited

Gadekar, Sonali. "Managing Intangible Assets by Measurement of Human Capital." Apotheosis: 85.