The entry to record the declaration of a stock dividend would include:

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The declaration of a stock dividend does not involve any payment of cash and therefore, there is no need for a credit to cash. However, it does result in a reduction in retained earnings as a portion of the retained earnings is transferred to common stock or additional paid-in capital depending on the type of stock dividend declared. Therefore, a debit to retained earnings is necessary. There is also a credit to common stock or additional paid-in capital to reflect the issuance of new shares.

The Entry to Record the Declaration of a Stock Dividend