Dividends declared near the end of an accounting period require two accounting entries:
1) when the dividend is declared; and
2) when the dividend is paid.
The correct entry to record the declaration of a cash dividend of 10c a share calculated on 200 000 shares is:
A) DR Dividend payable $20 000; CR Bank $20 000
B) DR Bank $20 000; CR Share capital $20 000
C) DR Retained earnings $20 000; CR Dividend payable $20 000
D) DR Dividend payable $20 000; CR Retained earnings $20 000

Question

Quizplus · Accepted Answer

When a dividend is declared, the company decreases Retained Earnings (a component of equity) and increases Dividend Payable (a liability), reflecting the obligation to pay the dividend.

Dividends Declared near the End of an Accounting Period Require