Which of the following correctly describes the recording of a dividend declaration by a company's board of directors?
A)A debit to retained earnings and a credit to cash.
B)A debit to additional paid-in capital and a credit to dividends payable.
C)A debit to cash and a credit to retained earnings.
D)A debit to retained earnings and a credit to dividends payable.

Question

Quizplus · Accepted Answer

When a company's board of directors declare a dividend, it is recorded by debiting the retained earnings account and crediting the dividends payable account. This reflects the decrease in retained earnings as a result of the dividend declaration and the increase in the liability to pay out the dividend to shareholders. Therefore, the correct answer is D, which is a debit to retained earnings and a credit to dividends payable.

Which of the Following Correctly Describes the Recording of a Dividend