The closing entry for dividends includes a debit to the Dividends account and a credit to Retained Earnings.

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The closing entry for dividends includes a debit to the Retained Earnings account and a credit to the Dividends account. This is because dividends represent a distribution of earnings to shareholders, and reducing Retained Earnings through a debit entry reflects the fact that the company has paid out some of its profits to its owners.

The Closing Entry for Dividends Includes a Debit to the Dividends