Which of the following happens at the date of declaration of a cash dividend?
A)Dr.Dividends Expense,Cr.Dividends Declared
B)Dr.Dividends Declared,Cr.Cash
C)Dr.Dividends Declared,Cr.Dividends Payable
D)The board of directors approves the dividend but no entry is made in the accounts.

Question

Quizplus · Accepted Answer

At the date of declaration of a cash dividend, the entry would be to debit Dividends Declared and credit Dividends Payable. This is because the company is declaring a dividend to be paid to its shareholders in the future, and so the dividend goes into a liability account until it is actually paid out. Option A is incorrect because the expense has already been recognized in a prior period. Option B is incorrect because cash is not yet paid out at the date of declaration. Option D is incorrect because an entry is made in the accounts to record the declaration of the dividend.

Which of the Following Happens at the Date of Declaration