The classiﬁcation and normal balance of the dividend account is
A) revenue with a credit balance.
B) an expense with a debit balance.
C) a liability with a credit balance.
D) shareholders' equity with a debit balance.

Question

Quizplus · Accepted Answer

Dividends are distributions to shareholders out of the company's earnings. They are considered a reduction in the company's retained earnings, which is a component of shareholders' equity. Unlike assets and expenses, which have a normal debit balance, or liabilities and revenues, which typically have a credit balance, dividends decrease equity and thus have a normal debit balance.

The Classiﬁcation and Normal Balance of the Dividend Account Is