Paying a previous dividend due to the company's stockholders would include a debit to:
A)Cash and a credit to Dividends.
B)Dividends Payable and a credit to Cash.
C)Retained Earnings and a credit to Cash.
D)Accounts Payable and a credit to Retained Earnings.

Question

Quizplus · Accepted Answer

When a company pays a previous dividend, it will debit the Dividends Payable account to reduce the liability and credit the Cash account for the amount paid. Therefore, B is the correct answer as it includes a debit to Dividends Payable and a credit to Cash. A is incorrect because it implies that the company is issuing a new dividend. C is incorrect because it would reduce the company's retained earnings, which is not the case when paying a previous dividend. D is incorrect because it involves accounts payable, which is a liability the company owes to its creditors and not related to dividends paid to stockholders.

Paying a Previous Dividend Due to the Company's Stockholders Would