When a corporation pays a dividend,the
A)expense account will be increased with a debit.
B)dividends account will be increased with a credit.
C)retained earnings account will be directly increased with a debit.
D)dividends account will be increased with a debit.

Question

Quizplus · Accepted Answer

When a corporation pays a dividend, the dividends account will be increased with a debit, as it is a reduction of the retained earnings (shareholder equity). This reduces the company's assets, as it is a distribution of profits to shareholders. The retained earnings account will also be decreased with a credit to reflect the payment of dividends. Options A and C are incorrect as expense accounts are not affected by dividends, and retained earnings are not directly increased by dividends. Option B could be misleading, as the dividends account is increased with a debit, not a credit.

When a Corporation Pays a Dividend,the