When the board of directors declares and pays a $500 dividend, which of the following would be included in the resulting journal entry?
A)Dr.Retained earnings, Cr.Cash
B)Dr.Cash, Cr.Retained Earnings
C)Dr.Retained Earnings, Cr.Dividends declared
D)Dr.Cash, Cr.Dividends payable

Question

Quizplus · Accepted Answer

When a dividend is declared and paid, the company decreases its retained earnings (an equity account) and decreases its cash (an asset account). The correct journal entry is to debit Retained Earnings and credit Cash, reflecting the reduction in retained earnings due to the dividend payment and the outflow of cash.

When the Board of Directors Declares and Pays a $500