When the board declares dividends,the correct journal will be
A)Dividends Expense Dividends Payable
B)Dividend Declared Cash
C)Dividends Declared Dividends Payable
D)Dividends Receivable Dividends Revenue

Question

Quizplus · Accepted Answer

When the board of directors declares dividends, it creates a liability for the company in the form of dividends payable to the shareholders. Therefore, the correct journal entry would be to debit Retained Earnings and credit Dividends Payable. This can be represented as "Dividends Declared (or Declared and Paid)Dividends Payable". Option C is the only one that correctly represents this journal entry.

When the Board Declares Dividends,the Correct Journal Will Be