In Accumulated Profits and Losses (Retained Earnings) has common items that either increase or decrease to this account as follows:
1. Net income (loss)
2. Prior period adjustments (error corrections and certain changes in accounting principle)
3. Dividends our of earnings (cash, property, liability and share)
4. Adjustment as a result of quasi-reorganization
5. Appropriation or restriction of retained earnings
6. Reversal of appropriation
7. Loss on share capital (including treasury) transaction
Whet it comes to Dividends out of earnings, the declaration or distribution of company’s earnings are recognized on the date of declaration as charge (debit) to the accumulated profits and losses. However, when shareholder approval is required for dividends declared prior to balance sheet date, a liability should be recognized only once the annual general meeting approves the dividends, because before the date the entity does not have a present obligation. Until that occurs, the dividend is only a contingent liability. If dividends are declared after the balance sheet date but before the financial statements are authorize for issue, the dividends are not recognized as a liability at the balance sheet date as they do not meet the criteria of a present obligation in PAS 37. Such dividends are disclosed in the notes to the financial statements in accordance with PAS 32.
Besides, according to the author of the accounting book that I have read, if the dividends are not declared at balance sheet date, no liability is recognized at balance date.