The entry to record the payment of an interim dividend includes a:
A)Debit to Interim dividend payable
B)Credit to Interim dividend payable
C)Credit to Bank
D)both A and C

Question

Quizplus · Accepted Answer

When a company announces an interim dividend, it creates a liability on its books to reflect the amount owed to shareholders. Therefore, to record the payment of an interim dividend, the company would need to debit the Interim dividend payable account (to reduce the liability) and credit the bank account (to reflect the payment). Hence, the answer is D, which is a debit to interim dividend payable and a credit to bank.

The Entry to Record the Payment of an Interim Dividend