If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration, the dividends account is closed to Retained Earnings at the end of the accounting period.

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This statement is true. If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration, the dividends account is closed to Retained Earnings at the end of the accounting period to properly reflect the decrease in equity resulting from the payment of dividends.

If the Dividends Account Is Not Recorded as a Reduction