On the date of declaration of the dividend, we debit Dividends.

Here's the step by step explanation:

1. When a company declares a dividend, it is committing to pay a certain amount of cash to its shareholders at some point in the future.

2. This declaration is a liability for the company, as it is now obligated to pay this money.

3. To record this liability, the company will debit (increase) its Dividends account. This represents the total amount of dividends that have been declared but not yet paid.

4. The credit side of this entry would typically be to a liability account such as Dividends Payable. However, since this account is not an option in your multiple choice question, the correct answer is to debit Dividends.

5. It's important to note that the actual payment of the dividends (which would involve crediting Cash) does not occur on the declaration date, but at some later date.

Question

On the date of declaration of the dividend, we debit Dividends.

Here's the step by step explanation:

1. When a company declares a dividend, it is committing to pay a certain amount of cash to its shareholders at some point in the future.

2. This declaration is a liability for the company, as it is now obligated to pay this money.

3. To record this liability, the company will debit (increase) its Dividends account. This represents the total amount of dividends that have been declared but not yet paid.

4. The credit side of this entry would typically be to a liability account such as Dividends Payable. However, since this account is not an option in your multiple choice question, the correct answer is to debit Dividends.

5. It's important to note that the actual payment of the dividends (which would involve crediting Cash) does not occur on the declaration date, but at some later date.

Knowee AI · Accepted Answer

On the date of declaration of the dividend, we debit Dividends.

Here's the step by step explanation:

1. When a company declares a dividend, it is committing to pay a certain amount of cash to its shareholders at some point in the future.

2. This declaration is a liability for the company, as it is now obligated to pay this money.

3. To record this liability, the company will debit (increase) its Dividends account. This represents the total amount of dividends that have been declared but not yet paid.

4. The credit side of this entry would typically be to a liability account such as Dividends Payable. However, since this account is not an option in your multiple choice question, the correct answer is to debit Dividends.

5. It's important to note that the actual payment of the dividends (which would involve crediting Cash) does not occur on the declaration date, but at some later date.

On the date of declaration of the dividend, we _____.Multiple Choicecredit Retained Earningscredit Cashdebit Dividendsdebit Dividends Payable

Question

On the date of declaration of the dividend, we _____.

Solution

Similar Questions

Upgrade your grade with Knowee