Recording the payment of dividends to shareholders involves:
A) Debiting Dividends and crediting Cash
B) Debiting Cash and Common Stock
C) Debiting Withdrawal Expense and crediting Cash
D) Debiting Notes Payable and crediting Cash
E) None of the above

Question

Quizplus · Accepted Answer

When a company pays dividends to its shareholders, it decreases its cash balance and records the distribution to shareholders. This is done by debiting the Dividends account, which reduces retained earnings, and crediting Cash, which reflects the outflow of cash.

Recording the Payment of Dividends to Shareholders Involves