Jones Hardware,Inc.pays a cash dividend of $6,000,what is the necessary entry to record this transaction:

Question

Quizplus · Accepted Answer

When a company pays a cash dividend, it reduces its retained earnings and gives the cash to the shareholders. Therefore, the necessary entry to record this transaction would be to debit "Dividends" for $6,000 (to decrease retained earnings) and credit "Cash" for $6,000 (to show the cash leaving the company). So, option B is the correct answer where it states to "Debit Dividends, Credit Cash."