The entry to record the declaration of a cash dividend consists of:

Question

Quizplus · Accepted Answer

When a company declares a cash dividend, it is a distribution of profits to its shareholders. To record this, the company debits Retained Earnings, which reduces the amount of profits it has accumulated, and credits Dividends Payable, which shows the amount owing to its shareholders. This liability will be cleared when the dividend is paid. Therefore, option A is the correct entry.

The Entry to Record the Declaration of a Cash Dividend