When a company declares a cash dividend, the recording will be Debit
[ Select ]
Retained Earnings
Dividend Expense
Profit and Loss
Dividend Payable
Cash
and Credit
[ Select ]
Retained Earnings
Account Payable
Dividend Expense
Dividend Payable
Cash
..

Question

When a company declares a cash dividend, the recording will be Debit 
[ Select ]
Retained Earnings
Dividend Expense
Profit and Loss
Dividend Payable
Cash
 and Credit 
[ Select ]
Retained Earnings
Account Payable
Dividend Expense
Dividend Payable
Cash
 ..

BlackTom AI · Accepted Answer

The question asks about the journal entry when a company declares a cash dividend, focusing on which accounts are debited and credited.
First, consider the nature of a dividend declaration: the company commits to paying cash to shareholders, which reduces retained earnings and creates a liability to pay the dividend. This means the debit should reduce equity via Retained Earnings, and the credit should recognize a liability to pay the dividend, typically Dividend Payable.
For the Debit side:
- Retained Earnings: This is the correct account to be debited because declaring a dividend reduces retained earnings, which is a component of shareholders’ equity. Debit entries increase asset or expense accounts and decrease liability or equity accounts; here, equity (retained earnings) is decreased.
- Dividend Expense: This is not appropriate at declaration for a cash dividend. Dividend expense would be used if declaring a distribution from earnings to owners in a different context (and it is not the standard accounting treatment for a cash dividend declaration).
- Cash: Not affected at the declaration stage. Cash is disbursed later when the dividend is paid, not when it is declared.
- Debit to Account Payable: While Accounts Payable is a liability, the standard dividend declaration creates a specific Dividend Payable liability, not a generic accounts payable.

For the Credit side:
- Dividend Payable: This is the correct credit to record the obligation to pay the dividend to shareholders. It creates a current liability until payment is made.
- Retained Earnings: Crediting Retained Earnings would double-count or improperly reduce equity; the reduction is already recorded on the debit side.
- Dividend Expense: Not appropriate here, as discussed above.
- Cash: Cash is not credited at declaration because the cash outflow occurs only when the dividend is paid.
- Account Payable: While this is a liability account, the common practice for dividends is to use Dividend Payable as the specific liability, not the general Accounts Payable.

Putting it together, the proper entry for declaring a cash dividend is:
Debit Retained Earnings; Credit Dividend Payable.
The other options do not align with the standard accounting treatment for a declaration of a cash dividend, either because they involve the wrong accounts for debiting (e.g., Dividend Expense, Cash) or the wrong credits (e.g., Cash, Account Payable, or Retained Earnings).

When a company declares a cash dividend, the recording will be Debit [ Select ] Retained Earnings Dividend Expense Profit and Loss Dividend Payable Cash and Credit [ Select ] Retained Earnings Account Payable Dividend Expense Dividend Payable Cash ..多重下拉选择题

类似问题

Journal entries associated with a cash dividend are usually made on which of the following dates?

Declared and paid $15,000 cash dividends to shareholders.

On 15 July 2023, Linh Do Accounting Firm paid a cash dividend that had been declared prior to the end of its June 30, 2023 financial year. The entry to pay the dividends includes a debit to:

When a company declares a cash dividend, the recording will be Debit Retained Earnings and Credit Dividend Payable ..

On 1 June 2022, Linh Do Accounting Company declared a $50 000 cash dividend to be distributed to its ordinary shareholders of record on June 15, 2022. The dividend will be paid on 15 July 2022. The required journal entry on 1 June includes a:

When a company declares a cash dividend, the recording will be Debit [ Select ] Dividend Expense Retained Earnings Dividend Payable Cash Profit and Loss and Credit [ Select ] Account Payable Retained Earnings Cash Dividend Expense Dividend Payable ..

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2-per-share dividend is declared?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单