With regards to the Dividends Payable and Dividends accounts,one of the closing entries required at year end,includes a:
A) credit to Retained Earnings.
B) credit to Dividends Payable.
C) debit to Dividends Payable.
D) debit to Retained Earnings.

Question

Quizplus · Accepted Answer

The closing entry for Dividends Payable involves debiting the account and crediting Retained Earnings. This is because dividends declared but not yet paid are subtracted from Retained Earnings, so when they are paid, this reduces the liability in Dividends Payable and increases the amount of money that is actually paid out, which is a reduction in Retained Earnings. Therefore, the correct closing entry is to debit Dividends Payable and credit Retained Earnings.

With Regards to the Dividends Payable and Dividends Accounts,one of the Closing