The account to which dividends are closed is called:
A)Cash.
B)Retained Earnings.
C)Common Stock.
D)Sales.

Question

Quizplus · Accepted Answer

Dividends are a distribution of earnings to shareholders, therefore the account to which dividends are closed is Retained Earnings. Choice A (Cash) would be incorrect because while the payment of dividends does involve a cash outflow, the payment itself is not recorded in the Cash account. Choice C (Common Stock) and D (Sales) are also incorrect as they are not related to the distribution of earnings to shareholders.

The Account to Which Dividends Are Closed Is Called